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Questions we've been asked: General issues
QB 12/10: Do the historic depreciation rates continue to apply to grandparented structures acquired before 1 April 2005?
- We have been asked whether the historic depreciation rates continue to apply to grandparented structures acquired before 1 April 2005, following the issue of determinations DEP79: Remedial matters relating to the depreciation of buildings Depreciation Determination Number 79 (“DEP79”) and DEP81: Fertiliser storage facilities and remedial matters relating to the depreciation of buildings and grandparented structures (“DEP81”).
- Yes. The historic depreciation rates continue to apply to grandparented structures acquired before 1 April 2005. DEP79 and DEP81 do not replace the historic depreciation rates. The historic depreciation rates that are published in IR 267 will always continue to apply to items acquired before 1 April 2005 (or to buildings acquired before 19 May 2005).
- Grandparented structures are items that have been regarded and treated as “structures” in the past for depreciation purposes, but now come within the meaning of “buildings” following the issue of Interpretation Statement IS 10/02: Meaning of “building” in the depreciation provisions (“IS 10/02”).
“Grandparented structure” is defined in section YA 1 of the Income Tax Act 2007 (“ITA”):
Grandparented structure means, for a person, any item on the following list, if the person acquired the item, or entered into a binding contract for the purchase or construction of the item, on or before 30 July 2009:
- barns, including barns (drying):
- carparks (buildings):
- chemical works:
- fertiliser works:
- powder drying buildings:
- site huts
- Grandparented structure means, for a person, any item on the following list, if the person acquired the item, or entered into a binding contract for the purchase or construction of the item, on or before 30 July 2009:
- The definition of “building” in section YA 1 of the ITA specifically excludes a grandparented structure for the purposes of subparts EE and EZ of the ITA. So for depreciation purposes, those items listed as grandparented structures that were acquired, or entered into a binding contract for the purchase or construction of the item, on or before 30 July 2009 are not treated as buildings, despite them coming within the meaning of “buildings” in IS 10/02. Any of these items acquired after that date are treated as a building.
- DEP79 and DEP81 set the rates applicable to these items acquired after 30 July 2009, by using the formula for calculating depreciation rates for buildings, to apply from the 2011-12 income year. DEP79 and DEP81 also clarify the rates that continue to apply to items acquired on or before 30 July 2009, by separating the asset classes into those acquired on or before 30 July 2009 and those acquired after that date.
- However, these two determinations do not replace the historic depreciation rates. The historic depreciation rates published in IR 267 are calculated using a different formula that must be applied to any items acquired before 1 April 2005 (or to buildings acquired before 19 May 2005).
- The following table is a compilation of the depreciation rates that correspond to the acquisition periods, applicable to the items listed as a “grandparented structure”:
|Estimated useful life||Acquired before 1 April 2005||Acquired between 1 April 2005, and 30 July 2009 (both dates inclusive)||Acquired on or after 31 July 2009|
|Diminishing value %||Straight-line %||Diminishing value %||Straight-line %||Diminishing value %||Straight-line %|
|Powder drying buildings||15.5||12||8||13||8.5||11||6.5|
|Note: The asset classes "Carpark (buildings and pads)" and "Site huts" have been reviewed following the issue of IS 10/02. The asset class "Carpark (buildings and pads)" has been split into "Carparking buildings" (treated as a building) and "Carparking pads" (continues to be treated as a structure). Site huts, by their very nature, will be either portable huts or portable buildings. Therefore, two new asset classes replace the asset class "Site huts": "Buildings (portable)" and "Portable huts (not buildings)". See the notes to DEP79 for more information.|
|Portable huts (not buildings)||12.5||15||10||16||10.5||16||10.5|
Other pages in: General issues
- QB 12/11: Income tax - look-through companies, rental properties and avoidance
- QB 12/09: Income tax - look-through companies: interest deductibility where funds are borrowed to make a payment to shareholders to reflect an asset revaluation
- QB 12/08: Income tax - look-through companies: interest deductibility on funds borrowed to repay shareholder current accounts
- QB 12/04: Income tax - deductibility of expenditure on widening or metalling a farm acess road or track
- QB 12/03: Income tax - deductibility of expenditure on cattle stops
- QB 12/05: Income tax - deductibility of expenditure on stock yards
- QB 12/02: Income tax - Treatment of quad bikes for depreciation purposes
- QB 12/01: Income tax - deductibility of expenditure on replacing and extending an inlet race to a dairy shed
- QB 11/03: Income tax - look through companies and interest deductibility
- QB 11/02: Deductibility of expenditure incurred by bloodstock breeders in respect of horses that they race
- QB 11/01: Residential investment property or properties in Australia owned by New Zealand resident - NRWT treatment of interest paid to Australian financial institution
- QB 09/06: GST - Apportionment of the cost of bare land for the purposes of a change-in-use adjustment
- QB 10/06: Elections for qualifying company status
- QB 10/01: Reimbursing shareholder-employees for motor vehicle expenses and the use of the Commissioner's mileage rate
- Are tax sparing disclosures still required?
- QB 09/05: Residential investment property or properties in Australia owned by New Zealand resident - NRWT treatment of interest paid to Australian financial institution
- QB 09/03: Decisions on application of CA 1(2) - common law interest and income under ordinary concepts
- QB 09/02: Holiday houses - income tax treatment
- QB 09/01: Payments made in addition to financial redress under Treaty of Waitangi settlements - income tax treatment
- QB 08/04: Income Tax Act 2007: research and development credits (subpart LH) - tax avoidance (section BG1)
- Kiwisaver - creditable membership
- QB 08/03: Application for a private ruling or product ruling on an issue dealt with in a mutual agreement made under a Double Tax Agreement - Tax Administration Act 1994, sections 91E(4)(D)(ii) and 91F(4)(D)
- QB 08/02: Commissioner's power to issue a replacement ruling that operates retrospectively
- QB 08/01: Tax Administration Act 1994 - Section 91E(4)(f) and self-assessment
- QB 07/05 - Ability to rule where the Commissioner is auditing or investigating - whether the Commissioner has a discretion to rule or is prohibited
- QB 07/02 - Whether The Minor Beneficiary Rule Exemption In Section HH 3B Applies On A $1,000 "Per Beneficiary" Or On A $1,000 "Per Beneficiary Per Trust" Basis.
- Tax treatment of wooden scaffolding planks
- Exemption from gift duty for dispositions of property made by or under an order of the Court: section 75(A) Estate and Gift Duties Act 1968
- Private and product binding rulings - to whom do they apply?
- Bankrupt's ability to carry forward accumulated losses
- Records for controlled foreign companies or foreign investment funds to be available in English
- Website expenditure - deductibility
- Qualifying foreign private annuity exemption from the Foreign Investment Fund regime
- Tourism service providers' payments made to tour guides or drivers - the income tax liability of those parties and the tour operator employing the guide or driver
- Managing communications associated with a dispute referred to the Disputes Review Unit
- When does derivation occur in relation to land sales with a deferred settlement, by business taxpayers who provide vendor finance?
- Section 108 Tax Administration Act 1994 (TAA) - commencement of four year statutory period (November 2002)