Transfers to interim entities as part of Treaty settlement arrangements

2010 amendment act addresses transfers to interim entities as part of Treaty settlement arrangements.


A significant proportion of pre-1990 forestry land is currently held by the Crown. Inland Revenue understands that much of this land is expected to eventually be transferred to Māori under Treaty of Waitangi settlements.

The Climate Change Response Act 2002 (CCRA) includes a provision under which the relevant Minister can appoint a person to apply for emissions units in relation to that land. It is expected that that person will transfer those emissions units to Māori along with the relevant land when the Treaty settlements are implemented.

Emissions units allocated in relation to pre-1990 forestry land generally receive capital treatment. This is because this allocation is to compensate for the loss in the value of this land resulting from the introduction of the Emissions Trading Scheme. Prior to the amendment in this Act, capital treatment would apply only to the initial recipient of the units - once they left that person’s hands they would normally have revenue account treatment, consistent with the fungible nature of emissions units.

However, that meant that the Māori persons or entities who eventually receive the emissions units from the person appointed by the Minister would have held those units on revenue account, and any gains made on disposal would be taxable. Revenue account treatment is not consistent with the underlying purpose and nature of these arrangements.

Key features

Legislation is amended to ensure that the Māori entity or person who receives a pre-1990 forest land emissions unit from the person appointed under section 73 of the CCRA also holds that unit on capital account.

The Income Tax Act provides capital treatment for emissions units defined in section YA 1 as “pre-1990 forest land emissions units”. In its original form, a unit meets this definition only when the person who holds it received it from the government in relation to pre-1990 forest land.

New paragraph (b) of the definition of "pre-1990 forest land emissions unit" extends the meaning of that definition to include units that were received from the person originally allocated them, when the units have been transferred under section 73 of the CCRA.

Application date

The amendment applies from 1 April 2010.