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 If you're a farmer who's recently gone through the process of obtaining a land use consent under the Resource Management Act, you've likely got a hefty invoice sitting on your desk. Between consultants, project managers, and application fees, these costs can easily run into tens of thousands of dollars. So naturally, you're wondering: "Can I claim this as a tax deduction?"The short answer? Unfortunately, no. But let's unpack why this matters and what it means for your farm business.

What's a Land Use Consent Anyway?

Before we dive into the tax treatment, let's get clear on what we're talking about. A land use consent is permission granted under sections 9 or 11 of the Resource Management Act 1991 (RMA) that allows you to use your land in a particular way.For farmers, this might include:

• Converting land from forestry to pastoral farming
• Establishing new dairy infrastructure on previously unused land
• Changing from sheep and beef to intensive dairy farming
• Developing land for horticulture or viticulture

Think of it as the council saying, "Yes, you can use your land for this specific farming purpose." It's different from a building consent (which is about structures) and different from environmental consents (which are about water use or discharges).

The Tax Treatment: Capital, Not Deductible

Here's where it gets frustrating for farmers. The IRD treats land use consent costs as capital expenditure, not operating expenses. And capital expenditure generally isn't tax deductible.Why? Because a land use consent is considered an asset of your farming business. You're not maintaining something that already exists—you're acquiring something new that will benefit your business for years to come. When you acquire an asset, those costs get capitalised (added to the cost of the asset) rather than deducted immediately.Let's look at a real-world example:

Case Study: Sarah's Dairy Conversion

Sarah owns 200 hectares in Taranaki. She's converting 80 hectares from dry stock to dairy farming. To do this legally, she needs a land use consent from the council. Her costs look like this:

Expense	Cost
Resource consent consultant	$25,000
Project management	$15,000
Council fees	$8,000
Environmental reports	$12,000
Total	$60,000

Sarah hoped to claim this $60,000 as a business expense in the year she paid it. Unfortunately, she can't. This entire amount is capital expenditure that must be capitalised as part of her land use consent asset.

But What About Depreciation?

You might be thinking, "Okay, if it's an asset, can I at least depreciate it over time?" This is where it gets even more complicated.For most assets, you can claim depreciation deductions over their useful life. Your tractor, your dairy shed, your fencing—these all depreciate. But intangible assets (things you can't physically touch) can only be depreciated if they're specifically listed in Schedule 14 of the Income Tax Act 2007.Here's the kicker: land use consents aren't on that list.Schedule 14 does include:

• "The right to use land"—but a land use consent isn't actually a right to use land (you already own the land). It's a right to do something specific on your land.
• Certain RMA consents for water use and discharges (sections 12–15B)—but these are environmental consents, not land use consents.

So no, you can't depreciate your land use consent costs either.

Why Does IRD Draw This Distinction?

The distinction between different types of RMA consents comes down to their nature and purpose:Environmental consents (water take, discharge permits) under sections 12–15B are explicitly included in Schedule 14 because they have finite, measurable useful lives. A water take consent might be granted for 10 or 15 years, after which it expires or needs renewal.Land use consents under sections 9 or 11 are more permanent in nature. Once granted, they typically run with the land indefinitely (subject to the conditions being met). Because there's no clear, finite useful life, IRD won't allow depreciation.It's a technical distinction that costs farmers real money.

The Practical Impact on Your Farm

Let's be honest about what this means for your cash flow and tax planning:

1. No immediate tax relief: That $60,000 Sarah spent? It provides no tax deduction in the year paid, or any future year.
2. Timing matters: If you're planning a land use change, factor in that these costs won't reduce your taxable income. Don't count on a tax refund to help with cash flow.
3. Business planning: These costs are "sunk" from a tax perspective. They need to be funded from genuine cash reserves or financing, not anticipated tax savings.
4. Sale implications: The land use consent becomes part of your farm's capital cost base. This may have implications if you ever sell the property and face a tax issue under the land disposal rules.

What About Other Consent Costs?

It's worth distinguishing what we're talking about here:Not deductible:

• Land use consent costs (as discussed)
• Costs to obtain building consents for capital works
• Costs for consents that create a new income-earning capability

Potentially deductible:

• Costs to renew existing consents where you're maintaining existing operations
• Costs for environmental consents (water, discharge) used in ongoing operations (these may be depreciable under Schedule 14)
• Annual consent monitoring fees and compliance costs

The key test is: are you acquiring something new and capital in nature, or maintaining your existing operations?

What Should You Do?

If you're facing land use consent costs, here's our practical advice:1. Budget accurately: Don't underestimate these costs. Get clear quotes upfront, and understand there's no tax relief coming.2. Consider timing: If you're profitable, there's no tax reason to rush or delay the consent application—it won't reduce your tax bill either way.3. Keep detailed records: Even though these costs aren't immediately deductible, maintain clear records of what you spent. If tax law changes in future, or if there are capital gains implications on sale, you'll need this documentation.4. Get advice on structure: In some complex situations, how you structure your farming operation (individuals, partnerships, companies, trusts) might create different outcomes. Talk to your accountant before committing to major land use changes.5. Focus on the business case: Make sure the land use change stacks up commercially, regardless of tax treatment. The consent costs are real money that needs to generate real returns.

The Bigger Picture

Land use consent costs are one of those frustrating areas where tax law doesn't align with what feels fair to farmers. You're investing in your business, improving your land's capability, and contributing to New Zealand's productive sector. But from IRD's perspective, you're acquiring a capital asset, and capital costs aren't deductible.Understanding these rules doesn't make them less painful, but it does help you plan accurately and avoid nasty surprises when you're doing your tax return.

Need Help?

Every farm's situation is different, and the line between capital and deductible can sometimes be blurry. If you're facing land use consent costs, or you're planning a significant change to your farming operation, talk to us before you commit. We can help you understand the full financial picture—not just the tax treatment, but the business case and cash flow implications too.At CMK Accountants, we've been working with farming families across Taranaki and beyond for nearly 70 years. We understand that tax rules don't always make sense from the farm gate, and we're here to translate the technical stuff into practical guidance you can actually use.Questions about your specific situation? Get in touch with our team.