Large budget screen production grants

2007 amendments clarify deductions for films that attract large budget film grants and the treatment of expenditure as being on revenue account property.

Sections DS 1, DS 2, DS 2B, EJ 4(1), EJ 5(1), EJ 7(1) and EJ 8(1) of the Income Tax Act 2004, and sections DS 1, DS 2, DS 2B, EJ 4(1), EJ 5(1), EJ 7(1) and EJ8(1) of the Income Tax Act 2007

The amendments do two things. Firstly they clarify the deduction and timing rules for films that attract large budget film grants and ensure that their original policy intent is correctly reflected in the legislation. They clarify that deductions are allowed for costs incurred in acquiring or producing a film, irrespective of whether a large budget screen production grant is paid.

Secondly, they provide (via new sections DS 2B of the Income Tax Act 2004 and DS 2B of the Income Tax Act 2007) that when a film asset is created with the intention of being sold, the expenditure is treated as expenditure on revenue account property. Existing section EA 2 of the Income Tax Act 2004 and section EA 2 of the Income Tax Act 2007 allows the deduction to be available when the film asset is sold. This reflects current practice for overseas-owned films that are made in New Zealand by a New Zealand-resident company.

Application date

The amendments apply from the 2005-06 income year, the same application date as the Income Tax Act 2004.