Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Income - Recoveries

CG 8C: Recoveries after deductions for high-priced bloodstock disposed of to non-residents

You could also call this:

“Tax on selling high-priced race horses to overseas buyers before they're used in New Zealand”

If you’re a person who plans to breed racehorses (called a prospective bloodstock breeder), this law applies to you when you sell expensive horses (high-priced bloodstock) to someone who doesn’t live in New Zealand. This happens before the horse has raced in New Zealand, been used for breeding here, or left the country. It also applies if you’ve claimed a tax deduction for the horse, and the horse is expected to be used for breeding in the future.

When you sell the horse, you’ll need to pay tax on some money. The amount you pay tax on is whichever is more: the amount you sold the horse for, or an amount worked out using a special calculation.

The calculation looks at how much of the horse you sold and how much you’ve claimed in tax deductions for it. It works like this: you multiply the percentage of the horse you sold by the total amount of tax deductions you’ve claimed for it.

You’ll need to include this money as income in the same year you sell the horse. This rule is more important than section CB 2(2), which means you follow this rule instead of that one.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS178902.

Topics:
Money and consumer rights > Taxes
Previous

CG 8B: Recoveries after deductions for high-priced bloodstock removed from New Zealand, or

“Tax on high-value racehorses taken overseas before racing or breeding in New Zealand”

Next

CG 9: Recovery of deductions for aircraft engine overhaul, or

“Reclaiming money from aircraft engine overhaul deductions when selling”

Part C Income
Recoveries

CG 8CRecoveries after deductions for high-priced bloodstock disposed of to non-residents

  1. This section applies when—

  2. a person who is a prospective bloodstock breeder (person A) disposes of high-priced bloodstock to a non-resident (person B) for consideration before the high-priced bloodstock has been—
    1. first raced in New Zealand:
      1. used for breeding in New Zealand:
        1. removed from New Zealand; and
        2. person A has been allowed a deduction in relation to the high-priced bloodstock; and
          1. the high-priced bloodstock is expected, at the time of the disposal, to be able to be used for future breeding.

            1. The amount described in subsection (3) is income of person A.

            2. The amount is the greater of—

            3. the amount of consideration receivable by person A for disposing of the high-priced bloodstock; and
              1. the amount given by the formula in subsection (4).

                1. For the purposes of subsection (3)(b), the amount is calculated using the formula—

                  ownership disposal percentage × total deductions.

                  Where:

                  • In the formula,—

                  • ownership disposal percentage is the percentage of person A’s total share or interest in the high-priced bloodstock that they have disposed of to person B:
                    1. total deductions is the amount equal to the total amount of deductions person A has been allowed in relation to the high-priced bloodstock.

                      1. The income is allocated to the income year in which the high-priced bloodstock is disposed of.

                      2. This section overrides section CB 2(2).

                      Notes
                      • Section CG 8B: inserted (with effect on 1 January 2019), on , by section 133(1) (and see section 133(2) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).