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Costs relating to failed production wells are deductible in the year of abandonment, instead of deductions being spread over seven years. Where a dry production well is drilled, an immediate deduction can be claimed in the year that the well is abandoned. A deduction for the remaining well development expenditure can be claimed in the year that the production well ceases producing and is abandoned, if the taxpayer is allocating development expenditure under the reserve depletion method.

New Zeland legisation

Income Tax Act 2007

  • Deductions from exploration and development expenditure - sections DT 1 to DT 8
  • Timing of development expenditure deductions - sections EJ 12 to EJ 20