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Changes to Business Tax Good for the Environment Carolyn Palmer (Inland Revenue)

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Presentation on theme: "Changes to Business Tax Good for the Environment Carolyn Palmer (Inland Revenue)"— Presentation transcript:

1 Changes to Business Tax Good for the Environment Carolyn Palmer (Inland Revenue)

2 Purpose of the changes  environmental tax reform  ensure all business operating costs, including those for dealing with environmental issues, are taken into consideration when calculating taxable income  ensure the timing of such deductions is appropriate  in summary the changes ensure existing tax policy applies to all business activities

3 Prior to the changes… Businesses claimed tax deductions in 3 ways. -deduction for normal operating (revenue) expenditure -depreciation for certain capital expenditure e.g. tanks, reservoirs, pipes, pumps, screens -deduction under DB 37 (DJ 10) for other capital expenditure

4 Problems Certain expenses were arguably not deductible… -DJ 10 predated the RMA so did not provide deductions for costs incurred in complying with new standards -unclear what was covered by the term “industrial waste”, this led to incorrect calculations of taxable income -not possible to match business income and tax deductions for costs incurred on or after cessation of business e.g. site restoration

5 Default expenditure categories and deduction rates

6 Environmental restoration account Assist with timing of deductions Voluntary fund - opt to transfer portion of tax payments into an Inland Revenue managed fund for future environmental monitoring and restoration Obtain refund when restoration or monitoring expenditure is incurred

7 What is different for my business?

8 Avoid, remedy, mitigate discharges to water

9 Avoid, remedy, mitigate discharges to air

10 Restoration beyond business site

11 Management and remediation of contaminated sites

12 Application Date Most changes apply for income years beginning and environmental expenditure incurred after 10 June 2005 Removing the distinction between industrial and non-industrial waste is retrospective (back to 1995/96 income yr) for taxpayers who have taken a wide interpretation of the term “industrial waste”


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