New Zealand: Update on tax proposals regarding feasibility expenditures, purchase price allocation rules

New Zealand: Update on tax proposals

The Finance and Expenditure Committee recommended a number of changes to the Taxation (Annual Rates for 2020-21, Feasibility Expenditure, and Remedial Matters) Bill, and reported back the bill. The bill is now pending the remaining parliamentary stages (that are expected to be completed before the end of March 2021).


The bill would allow a “feasibility expenditure” (defined as expenditure incurred in creating, acquiring or completing an asset that would be depreciable or taxable, if progress on the asset is abandoned) to be deductible over five years, from the year of abandonment. The deduction would be “clawed back” if the project is subsequently reinstated. 

Regarding purchase price allocation, the bill sets out rules when parties to a sale and purchase of assets have not agreed the allocation across different assets. At a high level, the vendor would need to determine the allocation in the first instance, but if this is not done, the onus would shift to the purchaser.  

The bill would allow the accounting treatment to be followed for tax purposes for leased plant and equipment when the new NZ IFRS 16 leasing standard applies.

Other measures in the bill concern:

  • Clarification of the definition of “dwelling” 
  • Goods and services tax treatment of mobile roaming services 
  • Contract labor and core research and development (R&D) activities

Read a March 2021 report prepared by the KPMG member firm in New Zealand 

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