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Income Tax Act 2007

Tax credits and other credits - Tax credits for petroleum miners

LT 1: Tax credits for petroleum miners

You could also call this:

“Tax credits available for petroleum miners with losses from stopping operations or well abandonment”

This section explains how petroleum miners or farm-in parties can get tax credits in certain situations. You can get a tax credit if:

  1. You have a deduction for stopping petroleum mining, for decommissioning costs, or for plugging and abandoning an exploratory well.
  2. You tell the tax department before you file your tax return.
  3. You have a net loss for the tax year.

The amount of the tax credit is based on your loss and the current tax rate. However, there are limits on how much credit you can get. The credit can’t be more than:

  1. The total tax you’ve paid in previous years, or
  2. A special calculation that takes into account your current loss credit and any excess from abandoning exploration.

If you’re part of a group of companies, the total tax paid includes tax paid by the group. If you’re a trustee, the tax paid includes tax on trustee income.

The amount of loss that gives you the credit doesn’t count as part of your tax loss for other purposes. You can use this tax credit to reduce your tax bill or get a refund.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS43927.

Topics:
Money and consumer rights > Taxes
Business > Industry rules
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“Rules for petroleum miners working outside New Zealand”

Part L Tax credits and other credits
Tax credits for petroleum miners

LT 1Tax credits for petroleum miners

  1. This section applies for an income year if a petroleum miner or a farm-in party—

  2. has—
    1. been allocated under section EJ 13(4) (Permanently ceasing petroleum mining operations) a deduction for the income year:
      1. incurred expenditure for which they are entitled to a deduction under section DT 16 (Decommissioning):
        1. incurred expenditure in plugging and abandoning an exploratory well for which they are entitled to a deduction; and
        2. notifies the Commissioner before they file the return of income for the income year; and
          1. has a net loss for the tax year corresponding to the income year.

            1. The petroleum miner or farm-in party has a tax credit for the tax year corresponding to the income year less than or equal to the amount (the current loss credit) calculated using the formula—

              amount of loss × tax rate.

              Where:

              • In the formula,—

              • amount of loss is the amount of the net loss described in subsection (1)(c) to the extent to which the amount does not exceed the total of the amounts for the deductions referred to in subsection (1)(a)(i) to (iii):
                1. tax rate is the basic rate of income tax set out in schedule 1, part A (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe benefits).

                  1. The amount of the credit must not be more than the lesser of—

                  2. the amount of total tax given by subsection (4B); and
                    1. the amount calculated using the formula—

                      1. In subsection (4)(a), total tax is the amount of income tax paid by,—

                      2. for a petroleum miner, the petroleum miner and any consolidated group of which they are a member on net income derived for all earlier tax years, calculated on a year-by-year basis and aggregated:
                        1. for a farm-in party, the farm-in party and any consolidated group of which they are a member on net income derived for all earlier tax years, calculated on a year-by-year basis and aggregated.

                          1. In the formula in subsection (4)(b), the item current loss credit is the amount given by subsection (2).

                          2. In the formula in subsection (4)(b), the item exploration abandonment excess is the greater of zero and,—

                          3. if the amount described in subsection (1)(a)(iii) is zero or the amount of the net loss described in subsection (1)(c) is less than or equal to the total amount of the deductions described in subsection (1)(a)(i) and (ii), zero; or
                            1. if the amount of the net loss described in subsection (1)(c) is equal to or exceeds the total amount of the deductions described in subsection (1)(a)(i) to (iii) and the amount described in subsection (1)(a)(iii) is greater than zero, the amount calculated by multiplying the amount referred to in subsection (1)(a)(iii) for the income year by the tax rate referred to in subsection (3)(b) and subtracting the amount of income tax (the post-abandonment tax) paid by,—
                              1. for a petroleum miner, the petroleum miner and any consolidated group of which they are a member on net income derived for tax years beginning after drilling for the purposes of exploration ceased in the exploratory well, calculated on a year-by-year basis and aggregated:
                                1. for a farm-in party, the farm-in party and any consolidated group of which they are a member on net income derived for tax years beginning after drilling for the purposes of exploration ceased in the exploratory well, calculated on a year-by-year basis and aggregated; or
                                2. if neither of paragraphs (a) and (b) applies, the amount calculated using the formula—

                                  1. In the formula in subsection (4D)(c),—

                                  2. net loss is the amount of the net loss described in subsection (1)(c):
                                    1. decommissioning deductions is the total amount of the deductions described in subsection (1)(a)(i) and (ii):
                                      1. tax rate is the tax rate referred to in subsection (3)(b):
                                        1. post-abandonment tax is the amount of income tax described in subsection (4D)(b).

                                          1. For the purposes of subsections (4B) and (4D), the amount of income tax paid by the consolidated group includes income tax paid on net income derived for tax years before the petroleum miner or farm-in party joined the group.

                                          2. For the purposes of subsections (4B) and (4D), if the petroleum miner or farm-in party is a trustee of a trust, the amount of tax paid for each earlier tax year is determined—

                                          3. first, by reference to the amount of income tax paid under the obligations of a trustee under section HC 32 (Liability of trustee as agent); and
                                            1. secondly, by reference to the amount of tax paid on trustee income; and
                                              1. calculated on a year-by-year basis and aggregated.

                                                1. In subsections (4B), (4D), and (6)(c) a reference to a calculation on a year-by-year basis refers to a calculation starting with the immediately preceding tax year and working backwards to earlier tax years until the amount of tax paid is equal to or more than the current loss credit.

                                                2. To the extent to which the petroleum miner or farm-in party has a tax credit under this section, the amount of the net loss giving rise to the credit does not form part of a tax loss component for the petroleum miner or farm-in party.

                                                3. The tax credit is available for use under section LA 6(2) (Remaining refundable credits: PAYE, RWT, and certain other items).

                                                4. Subsection (8) overrides section IA 2 (Tax losses).

                                                Notes
                                                • Section LT 1: inserted, on , by section 162(1) (and see section 162(2) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
                                                • Section LT 1(1)(a)(ii): amended, on , by section 130(1) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
                                                • Section LT 1(1)(a)(iii): inserted, on , by section 130(2) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
                                                • Section LT 1(2): amended, on , by section 130(3) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
                                                • Section LT 1(3)(a): amended, on , by section 130(4) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
                                                • Section LT 1(4) heading: replaced, on , by section 130(5) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
                                                • Section LT 1(4): replaced, on , by section 130(5) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
                                                • Section LT 1(4B) heading: inserted, on , by section 130(5) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
                                                • Section LT 1(4B): inserted, on , by section 130(5) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
                                                • Section LT 1(4C) heading: inserted, on , by section 130(5) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
                                                • Section LT 1(4C): inserted, on , by section 130(5) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
                                                • Section LT 1(4D) heading: inserted, on , by section 130(5) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
                                                • Section LT 1(4D): inserted, on , by section 130(5) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
                                                • Section LT 1(4D)(a): amended (with effect on 30 March 2022), on , by section 90 of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
                                                • Section LT 1(4E) heading: inserted, on , by section 130(5) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
                                                • Section LT 1(4E): inserted, on , by section 130(5) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
                                                • Section LT 1(5): amended, on , by section 130(6) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
                                                • Section LT 1(6): amended, on , by section 130(7) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
                                                • Section LT 1(7): amended, on , by section 130(8)(a) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
                                                • Section LT 1(7): amended, on , by section 130(8)(b) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).