Papua New Guinea

Individual - Deductions

Last reviewed - 23 June 2020

Employment expenses

Salary or wage earners receive a 25% rebate for allowable deductions to the extent of any salary or wages tax paid during an income year.

Additionally, an employee can apply to the IRC requesting a variation in the amount of salary or wages tax to be deducted to take into account the expected rebate on work-related expenses or otherwise deductible expenditure (such as housing expenditure). This variation must be made in writing together with fully supported documentation for each expense.

Business deductions

Non-salary or wage earners or taxpayers who derive other income in addition to salary or wages are allowed deductions incurred in earning their assessable income. Those taxpayers who are eligible and chose to be taxed as an SME are not entitled to tax deductions (see the Taxes on personal income section) as their tax liability is calculated with reference to turnover.

In PNG taxation law, there are general deductions and specific deductions.

Under the general deduction provision, all losses and expenditures, to the extent to which they are incurred in gaining or producing the assessable income or are necessarily incurred in carrying on a business for the purpose of gaining or producing that income, are allowable deductions. This is except to the extent to which they are losses or outgoings of capital, or of a capital, private, or domestic nature, or are incurred in relation to the gaining or production of exempt income.

Specific deductions include:

  • Interest on borrowed funds.
  • Travelling expenses, in limited circumstances.
  • Gifts of more than PGK 50 paid to a sporting body established in Papua New Guinea and qualifying charitable organisations.
  • Depreciation of income-producing assets, such as freehold, leasehold, or company title buildings (except those situated outside Papua New Guinea), motor vehicles, machinery, and equipment.
  • Rates, advertising, and repairs to rental properties.
  • Certain tax-related expenses.

Personal deductions

Expenditures of a private nature, such as dental or medical costs, are neither deductible nor subject to rebate or credit.

Personal allowances

In Papua New Guinea, personal allowances take the form of tax credits (see Dependant rebates in the Other tax credits and incentives section for more information).

Losses

Tax losses incurred in an income year may be carried forward for utilisation in future income years for a maximum of seven years. Losses derived in earning foreign income are quarantined and are therefore not allowable as deductions against PNG-sourced income.

Capital losses are not deductible.