New legislation - 2006: Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 [2006 No 3]

Bloodstock write-down rates

Sections EC 39, EC 40, EC 41, EC 42, EZ 4B and EC 4C of the Income Tax Act 2004

Write-down rates have been increased for stallions not previously used for breeding in New Zealand and for broodmares. Stallions not previously used for breeding in New Zealand will be written down over two years under the straight-line method, and the diminishing value rate will be 75%. Broodmares will be written down over varying periods depending on the age of the mare when first bought or brought into breeding, with older brood mares (aged eight or over when first used for breeding) written off in full in one year. These write-down rates will apply to bloodstock bought or brought into breeding on or after 1 August 2006.

Background

Stallions not previously used for breeding in New Zealand were previously written down over four years under the straight-line method, or at a diminishing value rate of 37.5%. Broodmares were previously written down over varying periods depending on the age of the broodmare when first brought into breeding. The effect was to write down broodmares not previously used for breeding in New Zealand over a maximum of eight years and a minimum of three years, and for broodmares previously used for breeding in New Zealand, a maximum of nine years and a minimum of three years.

Key features

The new write-down rates for bloodstock are in sections EC 41 and EC 42. Write-down rules for bloodstock that was bought or brought into breeding before 1 August 2006 are contained in new sections EZ 4B and EZ 4C. The effect is to transfer the old rules for bloodstock writedowns to a Terminating Provisions subpart of the Income Tax Act 2004, and to allow the new write-down rules to be used only for bloodstock brought into breeding on or after 1 August 2006.

Section EC 41 applies to bloodstock not previously used for breeding in New Zealand. Section EC 41(2) sets the annual reduction for stallions at 50% of the cost price of the stallion, unless the stallion is valued by the reducing value method. Section EC 41(3) sets the reducing value rate at 75%. The annual reduction for stallions previously used for breeding in New Zealand is set in section EC 41(1) at 20% of cost price.

The formula for broodmares not previously used for breeding in New Zealand is in section EC 41(6). The formula generates the annual amount to be used for writing down the broodmares to which it applies:

The age to be used in the formula is set in section EC 41(7). It is the age of the broodmare when first used for breeding, or if the broodmare is eight years of age or older, then the "age of broodmare" is set at eight.

The effect of this formula is to write down broodmares over a maximum of six years (for broodmares who begin breeding at age two), with broodmares aged eight and older written down in full in the year they are first used for breeding.

The formula for broodmares which have previously been used for breeding in New Zealand is in section EC 42(4). The formula generates the annual amount to be used for writing down the broodmares to which it applies:

The age to be used in the formula is set in section EC 42(5). It is the age of the broodmare when it is first used for breeding, or if the broodmare is eight years of age or older, then the "age of broodmare" is set at eight.

The effect of this formula is to write down broodmares which have previously been used for breeding in New Zealand over a maximum of seven years (for broodmares who begin breeding at age two), with broodmares aged eight and older written down in full in the year they are first used for breeding.

Sections EZ 4B and EZ 4C contain the rules for writing down bloodstock that was brought into breeding before 1 August 2006. These rules have not changed. Tax Information Bulletin, Vol. 14, No. 11 (November 2002) contains an explanation of these rules.

Application date

The new rules apply to bloodstock brought into breeding on or after 1 August 2006.

Other pages in: Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 [2006 No 3]

• Temporary exemption from tax on foreign income for new migrants and certain returning New Zealanders
• Clarification of treaty override power
• Rewrite amendments
• Reimbursement for the use of a private motor vehicle
• Organisation approved for charitable donee status
• Resident withholding tax on dividends paid by non-resident companies
• Amendments to disputes rules
• Miscellaneous technical amendments
• GST on goods outside New Zealand at the time of supply
• GST and distributions from a trust made for no consideration between associated registered persons
• GST and international postage stamps
• GST and credit contracts legislation
• Duty on racing
• GST on goods and services supplied to security holders
• Trans-Tasman imputation credit-streaming
• Regrassing and fertilising expenditure
• The addition of Spain to the grey list
• Unacceptable tax position
• Reverse takeovers and continuity rules
• Increase in the child tax rebate
• Income tax exemption for gaming machine income of gaming trusts
• Tax consequences of natural disasters
• Taxation of foreign hybrids and foreign tax credit rules
• Exemption for rights to benefit from employment-related foreign superannuation schemes
• New disclosure and recordkeeping rules for foreign trusts
• Treatment of distributions from cooperatives
• ACC attendant care payments
• Venture capital investment alongside the Venture Investment Fund
• Corporate migration
• Allocation of research and development tax deductions
• Taxation of share-lending transactions
• Fringe benefit tax
• Depreciation rates
• Aligning provisional tax payments with GST
• PAYE subsidy for small businesses

Date published: 22 Jun 2006

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