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Income Tax Act 2007

Deductions - Specific rules for expenditure types

DB 67: Feasibility expenditure: immediate deduction

You could also call this:

“Immediate tax deduction for some expenses when exploring new business opportunities”

You can get a tax deduction for some money you spend on trying to create or buy certain types of property. This applies to money spent after the 2019-2020 tax year. The property you’re working on must be something that loses value over time (and can be claimed as a tax deduction) or something you plan to sell for profit.

You can’t claim this deduction if you can already claim the money under another tax rule. Also, you can’t claim it for spending on land, certain financial arrangements, or intellectual property (except for some types that have a fixed life).

If you spend $10,000 or less in a year on these kinds of projects, you can claim all of it as a tax deduction. This rule overrides the usual rule about capital expenses, but you still need to meet the general rules for tax deductions.

Remember, even though this rule lets you claim some expenses that you usually couldn’t, you still need to follow all the other tax rules.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS478742.

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Money and consumer rights > Taxes
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Part D Deductions
Specific rules for expenditure types

DB 67Feasibility expenditure: immediate deduction

  1. This section applies for expenditure to the extent to which a person has—

  2. incurred expenditure for an income year after the 2019–20 income year in relation to making progress towards completing, creating, or acquiring property that, if it were to be completed, created, or acquired, would be—
    1. depreciable property for which the depreciation rate is more than 0%:
      1. revenue account property; and
      2. no deduction for the expenditure under any other provision.

        1. Despite subsection (1) this section does not apply to expenditure that is in relation to property on the following list:

        2. land, but excluding fixed life intangible property:
          1. an excepted financial arrangement:
            1. intangible property or intellectual property, but excluding fixed life intangible property.

              1. The person is allowed a deduction for the expenditure described in subsection (1), if their total expenditure described in subsection (1) in relation to all property is $10,000 or less for the income year.

              2. This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.

              Notes
              • Section DB 67: inserted (with effect on 1 April 2020), on , by section 32(1) (and see section 32(2) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).