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Mining Companies

19.A29. Section 153F provides the basis of assessment of mining companies and states that the assessable income is to be divided into mining and non-mining income. These special mining provisions apply only to New Zealand companies whose sole or principal source of income is mining in New Zealand for specified minerals and/or petroleum, or exploration and searching for minerals or petroleum for a reward related to and dependent on production or participation in profits from production of any specified mineral and/or petroleum.

19.A30. Mining expenditure is allowed first against assessable mining income of that same year, and two-thirds of any excess against other assessable income derived in that year. Any excess of non-mining expenditure over non-mining assessable income is allowed in full against mining income.

19.A31. Loss carry-forward. There is no time-limit on the availability of past losses for set-off against subsequent profits. Where mining expenditure is carried forward as a loss against income of a subsequent year, or past non-mining losses are carried forward against mining income, that carried-forward loss takes into account the differential in tax rates between mining and non-mining income. Such losses are offset firstly against the same class of income in that subsequent year and any excess mining loss then allowed against non-mining income. In such an event the balance of any non-mining loss available for carry forward is reduced by 150 per cent of the mining loss deducted from non-mining income.

19.A32. Appropriations. Either a mining company or a non-resident mining operator may appropriate income for expenditure within two years on exploration and development and may elect to claim a deduction of that amount against the income of the year to which those appropriated profits relate. The amount so allowed as a deduction is treated as assessable income of the succeeding year. The relevant expenditure incurred may be claimed as a deduction in that succeeding year, subject to a further right to claim as a deduction in that year any unexpended portion of that initial appropriation and, subject to the same general terms, make any new appropriations in respect of the succeeding two-year period. This will not apply if the result


  ― 325 ―
would be to put the taxpayer into a loss situation for the year's result overall. The effect of this provision, it will be noted, resembles the former section 122G of the Australian Act, except that the latter applied essentially to development expenditure. Such an appropriation provision enables a company to preserve its liquidity during the exploration stage of a mining venture in anticipation of substantial capital outlay.

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