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You can claim environmental expenses in certain situations.

When you can claim expenses

To claim expenses, all of the following conditions must apply: 

  • Your business is in New Zealand.
  • As part of that business, or when you are ending business operations, you incur expenses to avoid, fix, or reduce the damaging effects of contaminated discharge or making noise.
  • The expenses do not include reclaiming land, non-environmental dredging, or expenses related to the buying or acquiring of land.
  • The expenses do not relate to revenue account property.
  • No other provision allows a deduction for the expenses.

Deduction rates

Default deduction rates cover 4 cost categories

General description of expense Default deduction rate
Testing and feasibiliity expenses 100%
Restoration expenses 100%
Monitoring expenses 100%
Construction or improvement expenses The lesser of:
  • 35 years (1/35 deductable a year
  • the length of the applicable resource consent granted (1/life of resource consent)
You can choose the straight-line equivalent method to work out your deduction or the diminishing value equvalent method to adjust the rate of deduction.

If the default deduction rates do not give the correct calculation and taxation of income from business activities, you can apply to us for a category-specific rate.

Destruction or closure

If an environmental improvement is destroyed or a business closes, you can claim the remaining balance of the expense - the original cost minus any deduction you’ve already claimed.

Tax Technical advice

Read more about deducting expenditure related to mitigating environment hazards.

Tax Information Bulletin Vol 36 No 4 May 2024 (page 140)

Last updated: 03 May 2024
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