Tax Expenditures Included in the Income Tax Act 2007[3]

Accelerated depreciation: deferral

Sections DO 4-5, 12, DP 3, DZ 17-18, EE31 of the Income Tax Act 2007

The ability to depreciate capital items faster than their economic life reduces income by a greater amount in earlier years (deferring tax payments).

Bodies promoting amateur games and sports: exempt income

Section CW 46 of the Income Tax Act 2007

Income derived by a club, society or association is exempt income, providing it is established to promote an amateur game or sport and no funds are used for private pecuniary profit.

Bodies promoting scientific or industrial research: exempt income 

Section CW 49 of the Income Tax Act 2007

Income derived by a society or association established mainly to promote or encourage scientific or industrial research is exempt income, providing the society or association is approved by the Royal Society of New Zealand and no funds are used for private pecuniary profit.

Certain income derived by transitional residents: exempt income

Sections CW 27 and HR 8 of the Income Tax Act 2007

New tax residents in New Zealand can gain a temporary tax exemption for up to four years on most foreign-sourced income.

Charitable or other public benefit gifts by a company: deduction 

Section DB 41 of the Income Tax Act 2007

A company is allowed a deduction for a charitable or other public benefit gift when made to a society, institution, association, organisation, trust, or fund described in section LD(3)(2) or listed in schedule 32 of the Income Tax Act 2007 .

Charitable or other public benefits: tax credit 

Section LD 1-3 of the Income Tax Act 2007

A person who makes a charitable or other public benefit gift may under certain conditions is allowed a refundable tax credit. Payroll donations are allowed under sections LD 4-8.

Charities: exempt income

Sections CW 41-43 of the Income Tax Act 2007

Business, non-business and charitable bequests are exempt income for registered charitable entities. The exemption does not apply to business income to the extent that the charity carries out its charitable purposes outside New Zealand.

Child tax credit

Section LC 3 of the Income Tax Act 2007

A tax credit of up to $292.50 is available to children, as defined in the Act, for each tax year.

Community trusts: exempt income

Section CW 52 of the Income Tax Act 2007

Income derived by the trustee of a community trust is exempt income.

Farming and aquaculture business expenditure

Section DO 1-13 of the Income Tax Act 2007

Deductions granted for improvements and enhancements to land for farming and aquaculture can be expensed rather than treated as capital.

Film industry expenditure: deduction

Section DS 1-4 of the Income Tax Act 2007

Expenditure incurred acquiring film rights or film production expendiure can be expensed over a specified time frame.

Forestry expenditure: deduction 

Section DP 1 & DP 5 of the Income Tax Act 2007

Expenditures associated with forestry (ie, improvements or planting costs) can be expensed rather than treated as capital improvements.

Friendly societies: exempt income

Section CW 44 of the Income Tax Act 2007

Specified income derived by a friendly society is treated as exempt income.

Funeral Trusts: exempt income

Section CW 45 of the Income Tax Act 2007

Interest or a dividend derived by a trustee in a funeral trust is exempt income.

Herd improvement bodies: exempt income

Section CW 51 of the Income Tax Act 2007

Income derived by a herd improvement association, or society established mainly to promote an improvement in New Zealand dairy cattle, is exempt income, providing no funds are used for private pecuniary profit.

Housekeeping/carer: tax credit

Section LC 6 of the Income Tax Act 2007

A tax credit of up to $310 is granted for a person who makes specified housekeeping/carer payments in a tax year.

Income equalisation schemes

Subpart EH of the Income Tax Act 2007

Persons working in forestry, fishing, or farming entities may reduce their taxable income in a year by depositing taxable income with the IRD. The schemes allow taxable income to be transferred between years.

Income for military or police service in operational area: exempt income

Section CW 23-24 of the Income Tax Act 2007

Specified income derived by members of the New Zealand Defence Force (or the police) serving in an operational area can be treated as exempt income.

Income from conducting gaming-machine gambling: exempt income

Section CW 48 of the Income Tax Act 2007

Gross gambling proceeds from gaming-machine gambling are exempt income if the person complies with the Gambling Act 2003.

Income of the Governor-General: exempt income

Section CW 16 of the Income Tax Act 2007

Specific income received by the Governor-General under the

Governor-General Act 2010

is exempt from tax.

Independent earner tax credit

Section LC13 of the Income Tax Act 2007

Individuals whose income is between $24,000 and $44,000, and who are not receiving certain forms of income, are entitled to a tax credit of $520. This credit abates once annual income rises above $44,000.

Interest on home vendor mortgages: tax credit

Section LZ 6-8 of the Income Tax Act 2007

A tax credit may be available for interest from a home vendor mortgage.

Jurors' and witnesses' fees: exempt income

Section CW 26 of the Income Tax Act 2007

Fees paid by the Crown to jurors and its witnesses, other than expert witnesses, are exempt income.

KiwiSaver superannuation contribution tax exemption

Section RD 65 of the Income Tax Act 2007

Employers are provided a limited exemption from paying employer superannuation contribution tax (ESCT) for KiwiSaver contributions.

Local and regional promotional bodies: exempt income

Section CW 40 of the Income Tax Act 2007

The income derived by a charitable association or society is exempt income, if it is primarily established for beautification purposes.

Māori Authorities: deduction

Section DV 12 of the Income Tax Act 2007

A Māori authority is allowed a deduction for a donation that it makes to a Māori association as defined in the Māori Community Development Act 1962. It is also allowed a deduction for charitable or other public benefit gifts.

Mineral mining expenditure: deduction 

Section DU 1 of the Income Tax Act 2007

A mining company can deduct all exploration and development expenditure in the year it is incurred.

New Zealand companies operating in Niue

Section CW 59 of the Income Tax Act 2007

Income derived by a company incorporated in New Zealand that derives its income wholly or mainly from Niue is exempt income. Some dividends derived from such a company are exempt income.

Non-profit organisations: deduction

Section DV 8 of the Income Tax Act 2007

Non-profit organisations are allowed deductions for the lesser of $1,000 and the amount that would be the organisation's net income in the absence of any deductions.

Payments of interest post-war credits: exempt income

Section CW 5 of the Income Tax Act 2007

Interest derived by a person under section 2 of the

Income Tax (Repayment of Post-War Credits) Act 1959

of the United Kingdom Parliament is exempt income.

Payments of interest on farm mortgages: exempt income

Section CW 6 of the Income Tax Act 2007

50 percent of the interest that an individual derives from a mortgage securing a loan made by a seller of a farm is exempt income, if the Rural Banking and Finance Corporation of New Zealand approves the mortgage.

Petroleum mining expenditure: deduction

Sections DT 1, DT 5, and EJ 12 of the Income Tax Act 2007

Petroleum exploration expenditure can be deducted where it generates an asset.Development expenditure is written off over an accelerated seven-year period.

Redundancy tax credit

Section ML 2 of the Income Tax Act 2007

A person who derives a redundancy payment before 1 April 2011 is eligible for a tax credit of 6 cents per dollar received in redundancy payments, up to a maximum credit of $3,600 for each occasion of redundancy. Some forms of redundancy payment (e.g. related to retirement) are not eligible.

Scholarships and bursaries: exempt income

Section CW 36 of the Income Tax Act 2007

Any scholarship or bursary payment for attendance at an educational institution is exempt income, except for a basic grant or an independent circumstances grant under the Education Act 1989.

TAB and racing clubs: exempt income

Section CW 47 of the Income Tax Act 2007

Income derived by the New Zealand Racing Board, New Zealand Thoroughbred Racing, Harness Racing New Zealand and the New Zealand Greyhound Racing Association is exempt income.

Tax credit for transitional circumstances

Section LC 4 of the Income Tax Act 2007

The income-tested transitional circumstances tax credit is available to full-time earners working more than 20 hours without dependent children.

Veterinary services bodies: exempt income

Section CW 50 of the Income Tax Act 2007

Income derived by a veterinary association, club or society established mainly to promote efficient veterinary services in New Zealand is exempt income, providing no funds are used for private pecuniary profit.