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From 1 April 2014 new tax rules apply to the mining of minerals in New Zealand. The rules apply to exploration for, and development of the mines, and the physical mining of the minerals.
The new rules:
There is a deduction for mining expenditure in some of the specific phases of the mining process.
|If the deduction is for ...||then expenditure is ...|
|exploration||immediately deductible (see "Note" below").|
|development||capitalised and deductible over the life of the mine.|
|rehabilitation||deductible in the year it was incurred.|
When an item of exploration expenditure results in an asset used for commercial mining, the amount claimed as a deduction is added back as income. You then claim a deduction over the life of the mine as if it were developmental expenditure
Land used for mining is treated as revenue account property. This means that you account for:
in the income year the land is disposed of.
An amount received for the disposal of mineral mining assets is income.
Mineral mining assets are:
including an interest or share in any of these.
Land is not a mineral mining asset.
A immediate deduction is allowed for expenditure incurred in acquiring a mineral mining asset, if the asset was acquired before a mining permit was obtained for the mining area.
If the mineral mining asset was acquired after a mining permit was obtained the expenditure is spread over the life of the mine.
Rehabilitation expenditure, mining development expenditure or loss on disposal of land can occur when mining operations end. In the mine's final years there may not be sufficient income to be offset against this expenditure or loss.
The result for that tax year is a net income loss from mining.
The loss can be converted into a tax credit, which is refundable. The tax credit cannot exceed the total amount of tax paid on income from the same mine.
A mineral miner has two options for calculating the depreciation of mining development expenditure which is spread over the life of the mine.
Read more information in our Tax Information Bulletin, Vol 26, No 4, May 2014, pages 33-39