 | Welcome to this special edition | | | Following on from Dr Cullen’s earlier announcements the Inland Revenue Department ("IRD") and The New Zealand Treasury yesterday released the initial discussion paper on the possible changes to the depreciation rules. The discussion paper, Repairs and maintenance to the tax depreciation rules, addresses more than just Rental Property assets and looks at other industries as well. We will concentrate on what this means to you as property investors.
| | Initial Comment | | | This is a pretty good document from an investor’s perspective. This is nowhere as bad as perhaps the media had been making out. There will still be benefits for investors. We will be meeting with leading property professionals and various MP’s over the next week and we will make further comment shortly.
| | Summary for Rental Properties | | | The following is directly quoted from the discussion document and is a summary of what is included in the document for property investors. "There is some uncertainty as to the extent to which different parts of a building – such as the electrical wiring, plumbing and internal walls – can be split out and depreciated separately. This can lead to considerable variation in the tax liabilities of two different taxpayers with otherwise identical properties but who take different approaches to splitting out building components. This issue is of particular concern with respect to residential rental properties. We suggest allowing owners of residential rental property two options. The first, which would have higher compliance costs, would allow splitting out for a certain group of separately identifiable assets but would require structural components such as wiring, plumbing and internal walls to be depreciated as part of the building. The second would be to depreciate all building assets as part of the building, but allow greater scope to deduct replacements as repairs and maintenance".
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We have tried to include a variety of articles and viewpoints on property recently contained in the media. Please note that the articles are a summary of the main points and we endeavour to reflect these as accurately as possible. The contents do not constitute professional advice and should not be relied upon as such. We strongly recommend that you seek professional advice at all times. The information is in no way a reflection of views held by Valuit Asset Appraisals Ltd or its staff.
|  | | | | Key Dates | | If you wish to make a submission to the IRD on the proposed changes there are two key dates contained in the paper. The first is 31 August 2004, which is for technical issues. The Government would like to include these issues in its tax bill, which it plans to table in November 2004. The second date is 30 September 2004, which, for property investors, has a number of other potential major issues including:
- the extent to which owners of rental property should be able to separate out structural components of a building and depreciate them at separate rates;
- methods of calculating depreciation for plant, equipment and buildings;
- depreciation loadings.
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