01 Apr 1964

Land and Income Tax Amendment Act (No. 2) 1963 (mining incentives)

Archived legislative commentary on Land and Income Tax Amendment Act (No. 2) 1963 (mining incentives) from PIB vol 9 Apr 1964.

This commentary item was published in Public Information Bulletin Volume 9, April 1964.

More information about Public Information Bulletins.

Are You Interested In A Business On The West Coast

This article outlines the main provisions of recent legislation providing for an investment allowance in respect of certain capital expenditure incurred in re-development activities in the West Coast region.

Main Theme

The legislation aims at assisting the re-development of the West Coast region by providing for an additional deduction from assessable income of 20 percent of the capital expenditure incurred in acquiring certain plant or machinery or in erecting or extending certain buildings for use in re-development projects in the region. The 20 percent allowance compares favourable with the 10 percent allowance available for the rest of New Zealand and it means that over the life of a particular asset the taxpayer can write off up to 120 percent of the cost.

Re-Development Region

This comprises the following counties and boroughs:-

Counties Boroughs
Buller Brunner
Grey Greymouth
Inangahua Hokitika
Westland Kumara

Re-Development Project

This is defined as any undertaking, scheme or work which in the opinion of the Minister of Finance has as its sole or principal purpose the re-development of the region comprised in the foregoing counties and boroughs or is or will be of importance in the re-development of that region and which has been approved by the Minister as a re-development project.

Actual residence in the region is not a pre-requisite. Persons from outside the West Coast who engage in approved activities in the region may qualify for the allowance.

Expenditure which qualifies

Expenditure on new capital assets will generally qualify for the 20 percent allowance. The assets fall into two broad categories and these are discussed in the succeeding paragraphs.

Plant and Machinery

(i) Non-Qualifying

Certain items are specifically excluded from qualifying for the investment allowance. These are:-

  • motor cars or station wagons except those which are passenger service vehicles as defined in Section 2(1) of the Transport Act 1962;
  • blocks, bolsters, core boxes, dies, driers, flasks, gauges, jigs, lasts, matrixes, moulds, patterns, saggars, stereotypes, templets and tooling (including workholding fixtures, working heads, and tool holders), and articles of a description, or having a use similar to that of any of those articles, except where such items are, by arrangement with the Department, subject to an allowance by way of depreciation and cost more than £30;
  • hand tools and loose tools;
  • any unit costing less than £30.

Broadly therefore, motor cars and station wagons are excluded from the allowance unless they are taxis or service cars or rental vehicles and the particular business activities are approved as re-development projects. Other vehicles such as trucks, vans, tractors etc. can qualify if the other conditions are satisfied.

The other non-qualifying items listed above may be broadly classified as non-depreciable items.

(ii) Qualifying

Assets which are not excluded under (i) above and which are

  • new, as distinct from used or second-hand;
  • owned by the taxpayer;
  • acquired or installed on or after 12 July 1963 and on or before 31 March 1967;
  • for use by the taxpayer in the re-development region;
  • for use primarily and principally and directly in and for the purposes of any re-development project carried on by the taxpayer or in performing services in relation to any re-development project.

Plant or machinery which can qualify therefore is not restricted to manufacturing equipment alone but includes all plant and machinery used in or in relation to any re-development project.

Where the new plant or machinery was acquired before 12 July 1963 but was not installed until after that date the allowance may be claimed if the project is approved and the other requirements are met.


In contrast to the ordinary investment allowance available elsewhere in New Zealand the West Coast allowance may be gained in respect of capital expenditure on new buildings or extensions to existing buildings. The particular conditions applying to the allowance on capital expenditure on buildings are:-

  • the building must be owned by the taxpayer;
  • it must be erected (or extended) on or after 12 July 1963 and on or before 31 March 1967;
  • it must be situated in the re-development region;
  • it must be for use primarily and principally and directly in and for the purposes of a re-development project carried on by the taxpayer or for use in performing services in relation to any re-development project.

As is the case with the allowance in respect of plant or machinery, the concession is not restricted to manufacturing and agricultural buildings or extensions to such buildings. If the activity is approved by the Minister of Finance and the other conditions are satisfied the allowance may be gained in respect of activities other than manufacture and agriculture.


Provision for apportionment of the investment allowance is made so as to meet cases where the plant, machinery, buildings or extensions have been used:-

(i) outside the re-development region and for purposes other than the re-development project, or

(ii) partly in producing non-assessable or exempt income.

Recoupment of Expenditure

Where an owner has incurred capital expenditure on new plant machinery or new buildings or extensions to existing buildings and he has been recouped or is entitled to be recouped for that expenditure, the investment allowance is calculated on the net capital cost to the owner after taking into account the sum recouped.

Dual Allowances Prohibited

If the 20 percent West Coast Investment allowance has been granted in respect of plant or machinery used in agricultural or manufacturing activities, the other more restricted ten percent investment allowance available generally throughout New Zealand cannot be claimed on those same assets. Conversely, if the 10 percent allowance has been claimed the West Coast allowance cannot be gained.

Specific Approved Projects

The Minister of Finance has announced that all manufacturing and agricultural activities in the defined West Coast re-development region are approved as re-development projects for the purposes of the investment allowance in respect of capital expenditure on new plant or machinery.

This means that any person engaged in these activities in the region will automatically qualify for the twenty percent investment allowance on capital expenditure incurred in the acquisition of new plant or machinery. For the farmer or agricultural contractor it means that the allowance is immediately available on a new tractor or truck, for example. For the manufacturer it means that new plant or machinery - purchased for factory or office will generally attract the allowance.

Other activities and Buildings

Specific approval of the activity as a 're-development project' is required in every other case not falling within the terms of the Minister's announcement as outlined in the paragraph above. In brief this means that:-

(i) all non-manufacturing or non-agricultural activities require specific approval as re-development projects before the investment allowance can be gained on both plant or machinery and buildings or extensions, and

(ii) manufacturing and agricultural activities require specific approval where the investment allowance is sought on buildings and extensions.

How to Apply

(i) Approved Activities

The allowance in respect of capital expenditure on new manufacturing or agricultural plant or machinery may be claimed in the appropriate tax return without prior reference to the Department. Form IR39A is available from local tax offices and should be completed and attached to the return in support of the investment allowance claimed.

(ii) Other Activities and Buildings

In these cases prior application is necessary before the investment allowance may be granted. The initial application for approval should be made to the local office of the Department. Information in support of the application should generally include:-

(a) nature of the activity carried on or proposed to be carried on;

(b) particulars of the capital expenditure involved;

(c) purpose for which the asset (plant or machinery or building) is to be used;

(d) extent of similar activities carried on in the region;

(e) manner in which activity or project will contribute to re-development of the region e.g. additional employment, cheaper products and so on;

(f) any other relevant information.

Such applications will then be submitted by the Department to the Minister of Finance for his consideration.

When Allowance may be Claimed

In all cases, whether the allowance is granted under the general approval given by the Minister for manufacturing and agricultural plant or machinery, or under specific approvals in the case of other activities and buildings, the allowance is to be claimed in the return of income for the year in which the asset is first used. This may not coincide with the year in which the capital expenditure is actually incurred or when the asset is actually acquired.


Taxpayers wishing to discuss any points more fully are invited to contact the local office of the Department where as much assistance and information as possible will be given.