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Are Expenditures With Capital Nature non-Deductible?

Case Law

Trustpower Ltd v Commissioner of Inland Revenue [2016] NZSC 91


Facts of the case

During the 2006, 2007 and 2008 tax years, Trust Power incurred costs totaling approximately $17.7m in relation to four proposed electricity generation projects. One of the projects has been completed Trustpower has not yet decided whether to proceed with the project or with the other three consented projects.


The issue of the case is whether the expenditure incurred in obtaining the resource consents for the four projects is on revenue account and therefore deductible or, instead, is on capital account and therefore not deductible.

Court Decision

  • Any expenditure addressed to a capital project will be on capital account and non-deductible
  • Court did not accept the Trustpower’s argument that all feasible expenditure incurred prior to commitment to obtain capital asset will be deductible.
  • expenditure associated with early stage feasibility assessment, that is a normal incident of business, may be deductible, particularly where it is not directed toward a specific project.

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