Skip to main content
Inland Revenue

Tax Policy

Fact sheet - Tax relief for donated trading stock


Some businesses have donated trading stock (or supplied trading stock for less than market value) for the purpose of alleviating the effects of the earthquakes. This fact sheet contains additional information of the tax relief for donated trading stock announced by Ministers today. It is proposed that retrospective amending legislation be introduced and enacted in May 2011. Accordingly, businesses should confirm the amending legislation before finalising their tax position.

New exclusion

Generally, when a person disposes of trading stock at below market value the person is treated, under an anti-avoidance measure, as deriving an amount equal to the market value of that trading stock at the time of disposal. In response to the Christchurch earthquake, a new exclusion from this tax treatment will be legislated for. With this new exclusion in place, only the value of the actual consideration, if any, received will need to be returned as income by the business.

Details of exclusion

  • The new exclusion will cover businesses that donate (or supply for less than market value) their trading stock for the purpose of alleviating the effects of the earthquake.
  • The applicable meaning of trading stock will be that contained in section EB 2 of the Income Tax Act 2007.
  • The new exclusion will apply in respect of both the 4 September 2010 Canterbury earthquake and the 22 February 2011 Christchurch earthquake.
  • For the exclusion to apply the trading stock must be disposed of:
    - for less than market value;
    - to non-associated persons; and
    - within the period beginning on 4 September 2010 and ending on 31 March 2012.*

Associated new gift duty exemption

Where the above exclusion applies, a new exemption from gift duty will also be legislated for. This exemption will also have retrospective effect.

GST on donated goods

Where the disposal is to non-associated persons there are no GST implications beyond dealing with the GST fraction of any consideration received or paid.

* The time period was originally announced as being within four months of each earthquake.  On 4 May 2011 a bill was tabled in Parliament under which the time period was updated to cover the period beginning on 4 September 2010 and ending on 31 March 2012.