Income Tax Act 2007

Deductions - Expenditure specific to certain industries

DW 6: Aircraft operators: payments and adjustments under finance leases

You could also call this:

"Tax rules for aircraft owners who lease planes and pay for engine repairs"

When you lease an aircraft engine or an aircraft with an engine, and you meet certain requirements, this section applies to you. You meet these requirements if you are allowed a deduction for spending money on overhauling the aircraft engine, as stated in section DW 5(1). This means you can claim some expenses back on your taxes.

If you pay money to the lessor, the person you lease from, for aircraft engine overhauls during the lease, you cannot claim this payment as a deduction. Also, if the lessor pays you back when you overhaul the engine, this payment is not considered your income.

At the end of the lease, if you paid more for overhauls than you got back, you can claim the difference as a deduction on your taxes for that year. If the lease says you must pay or receive money based on the cost of an overhaul and how much of the scheduled overhaul period has passed, you can claim what you pay as a deduction, and what you receive is considered your income under section CG 4(2).

This section has priority over section CG 4, which means it overrides those rules when it comes to leasing aircraft engines or aircraft.

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This page was last updated on 5 August 2025

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM7276309.

Topics:

Money and consumer rights > Taxes

DW 5: Aircraft operators: aircraft engines and aircraft engine overhauls, or

"Tax rules for aircraft businesses: claiming engine costs"

DX 1: Testamentary annuities, or

"Tax deductions for annuities paid due to wills or family agreements"

Part DDeductions
Expenditure specific to certain industries

DW 6Aircraft operators: payments and adjustments under finance leases

This section applies when a person leasing under a finance lease an aircraft engine, or an aircraft including an unpriced aircraft engine, meets the requirements of section DW 5(1) for being allowed a deduction for expenditure incurred in performing an aircraft engine overhaul of the aircraft engine.
If, during the term of the lease, the person pays an amount under the lease to the lessor towards the cost of aircraft engine overhauls,—
the person does not have a deduction for the payment; and
a payment of a corresponding amount by the lessor to the person when the person incurs expenditure in performing an aircraft engine overhaul of the aircraft engine is not income of the person.

If, at the end of the lease, the total amount of the payments referred to in subsection (2)(a) exceed the total amount of the payments referred to in subsection (2)(b), the person has a deduction for the income year in which the lease ends equal to the amount of the excess.
If the lease requires the person to pay to the lessor, or the lessor to pay to the person, at the end of the lease an amount that is calculated from the cost of an aircraft engine overhaul and the proportion of the scheduled overhaul period for the aircraft engine that is expired when the lease ends,—
an amount that the person is required to pay is allowed as a deduction of the person; and
an amount that the person is entitled to receive is income of the person under section CG 4(2) (Receipts for expenditure or loss from insurance, indemnity, or otherwise).

This section overrides section CG 4.

Notes

Section DW 6: inserted, on 1 April 2017 (applying for the 2017–18 and later income years), by section 52(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).