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Timing Rules


Accrual expenditure deduction rules

Accrual expenditure is allowed as a deduction in the year in which it is incurred. However, the unexpired amount must be returned as income at the end of the year. The returned amount is treated as expenditure and deducted in the subsequent year (EA3).

For example:


2022 deduction


Unexpired portion


2022 net deduction


2023 opening deduction



(2) A company paid $120,000 rent on 1st January 2013 for 12 months. On 31th March, it filed a tax return. The net deduction for 2012-2013 financial year was $30,000 ($10,000 rent each month). The rest $90,000 was opening deduction for next financial year.  Notice, if the unexpired amount is no more than $26,000 , and the unexpired period is no more than 6 months, the unexpired portion is deductible in the current income year.


Under TIB vol 21:2 (2009), under some situations, a person, for an income year, is allowed a deduction which is exempted from complying with EA3. Below are some examples:

Description of expenditure

Maximum total amount of unexpired portions

Time period between balance date and expiry date

Payment for purchase of consumable aids



insurance premiums under an insurance contract if the total amount of such expenditure incurred in the income year in respect of the contract does not exceed $12,000


12 months

rental for the lease of land or buildings relating to a period ending more than 1 month after balance date


6 months

Payment for the use or maintenance of telephone and other communication equipment


2 months

costs for services, other than those dealt with elsewhere in this determination


6 months

Purchase of stationery



motor vehicle registration

and drivers’ licence fees



subscriptions for a

newspaper, journal, or

other periodical, including

for the maintenance

or annotation of a

documentary information




costs on postal and courier

services, including such

expenditure for franking,

private post boxes and

private postbags, business

reply post and freepost,

and expenditure evidenced

by the possession of postal




advance bookings for

travel and hotel or motel



6 months

cost of advertising


6 months

road-user charges



audit fees



mandatory accounting




Deferred Employment Payment:

Employee monetary remuneration is deducted in the current income year; provided it is paid within 63 days after the end of the income year; or it is paid to a shareholder-employee before the last date when he could file an income tax return (EA4).

Consumable aids:

This concept of consumable aid is not defined in ITA 2007 but it is stated in NZ IAS-2: Inventories. Consumable aids are materials absorbed in the production of goods and services but do not become part of the finished product or service. For example, it is the fuel consumed in order to transfer the inventories (different inventories so the cost cannot be distributed to individual inventory).  

The costs of consumable aids are typically deductible under the general deductibility test in DA1. If the consumable aids on hand are below $58,000 at the end of the year, it is deducted at the end of the year (E12), otherwise it is added back to income. For example, a company spent incurred $100,000 purchasing consumable aids. At the end of year, it had consumable aids on hand with a value of $50,000. The value is below $58,000, so the $100,000 is deductible as a ‘cost of inventories’. If at the end of year, the consumable aids on hand had a value of $60,000, the $60,000 was added back to income for that year and only $40,000 (100,000-60,000) was deductible as a cost of inventories. 

When calculating the value of trading stocks for income tax purpose, an adjustment to remove consumable aids is required, provided that the consumable aids on hand do not exceed $58,000. However, for financial reporting purposes, the consumable aids are included in the cost of inventories. In other way, the consumable aids are capitalised.  

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New Zealand Tax Accountant