Environmental expenditure is tax deductible if:
- the taxpayer is in business in New Zealand
- the taxpayer’s business includes testing, construction, restoration, or monitoring
- it does not include land reclamation, non-environmental dredging or expenditure related to the acquisition of land
- it does not relate to revenue account property
- tax deduction is not provided for elsewhere. Including farming business expenditures that are not covered by specific agricultural provisions.
The default deduction rates cover 4 categories of costs.
Testing and feasibility expenditure: 100% deductible.
Restoration expenditure: 100% deductible.
Monitoring expenditure: 100% deductible.
Construction or improvement expenditure is either:
- the lesser of either 35 years (1/35 deductible per year)
- the length of the applicable resource consent granted (1/life of resource consent deductible per year). You can use a straight-line deduction or adjust the rate to give a diminishing value deduction.
If the default deduction rates do not result in 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 unamortised balance of the expenditure.