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Inland Revenue issued interpretation statement IS 18/06 Income Tax – Treatment of Costs of Resource Consents on 5 November 2018. This interpretation statement discusses the income tax treatment of resource consents.
There are different types of resource consents under the Resource Management Act 2000 (RMA). However, for tax purposes resource consents can be divided into two groups, land consents and environmental consents, with each group having a different income tax treatment.
Land consents can be characterised as follows:
Environmental consents include:
The different natures of the consents affect the tax treatment of the expenditure. In terms of depreciation, environmental consents are items of depreciable intangible property and the expenditure that forms the cost base can be depreciated over the fixed term of the consent.
Land consents are generally of unlimited duration and will not usually be depreciable property. Expenditure on land consents can usually only be depreciated to the extent that the expenditure can be capitalised into the cost of another item of depreciable property. No depreciation deduction is available for any expenditure capitalised into the cost base of land or certain buildings.