Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Income - Adjustments - Expenditure other than for entities’ purposes

CH 13: Feasibility expenditure clawback

You could also call this:

“Repaying tax on previously claimed project expenses when restarting within 7 years”

This law is about what happens when you spend money on a project, but then stop working on it for a while before starting again. Here’s how it works:

If you’ve claimed a tax deduction for money you spent on a project that you stopped working on, but then later you finish the project or start a similar one, you might have to pay some tax.

You only need to worry about this rule for up to 7 years after you last claimed the tax deduction. After 7 years, this rule doesn’t apply anymore.

If you do finish the project or start a similar one within those 7 years, you’ll have to pay tax on all the money you claimed as a deduction before. This happens in the same year that you finish or start the new project.

The government calls the money you claimed before a “feasibility expenditure deduction”. You can find more details about this in section DB 66(3) of the tax law.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS484602.

Topics:

Money and consumer rights > Taxes

CH 12: Income from hybrid mismatch arrangement, or

“Money earned from certain international tax arrangements must be counted as taxable income”

CO 1: Income from voluntary activities, or

“Money from voluntary work may be taxable, but some exceptions apply”

Part C Income
Adjustments: Expenditure other than for entities’ purposes

CH 13Feasibility expenditure clawback

This section applies when a person—
has deducted an amount under section DB 66(3) (Feasibility expenditure: spread deduction) for property in relation to which they abandoned further progress, with the result that the property was not completed, created, or acquired; and
subsequently completes or creates the property, or acquires the property or similar property.

Despite subsection (1), this section does not apply for an income year that is more than 7 years after the last income year for which a person has deducted an amount under section DB 66(3).
The person has, in the income year in which they subsequently complete, create, or acquire the property or similar property, income equal to the amount of the total deductions under section DB 66(3) for the property.

Notes

Section CH 13: inserted (with effect on 1 April 2020), on 30 March 2021, by section 18(1) (and see section 18(2) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).