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Inland Revenue

Tax Policy


Clauses 16, 39, 41, 42, 44, 54, 55 and 124

This group of amendments addresses the tax treatment of certain items of “black hole” expenditure, which is business expenditure of a capital nature that is neither immediately deductible nor gives rise to a depreciable asset for tax purposes. The amendments address the tax treatment of expenditure on:

  • failed or aborted resource consents, patents and plant variety rights;
  • certain fixed-life resource consents; and
  • paying a dividend, annual subscriptions to be listed on a stock exchange, and shareholder meetings.

Five submitters commented on these aspects of the bill. Generally submitters supported the changes to remove certain distortions arising from tax settings, reduce compliance costs and provide certainty of tax treatment for taxpayers.

However, submitters were concerned about the proposed claw-back provision (proposed new section CG 7B) clawing back a larger amount of deductions than intended. They also noted that other fixed-life resource consents remain subject to “black hole” tax treatment. The proposed non-deductibility of expenditure on special shareholder meetings was not supported by most submitters. Submitters also advocated making the application dates of certain changes retrospective on the basis that the amendments are remedial and/or clarify and confirm current practice.