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You can claim environmental expenditure as an expense 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.

Deduction rates

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 - the original cost, minus any deduction already claimed.