2010 Articles and updates

Keeping up to Date

2010 Articles and updates

2010 Budget update

Well, what a day!!! To be sitting at a café yesterday debating the possible budget changes to last night, reflecting on the changes and today handling a barrage of calls and emails. We have the answers and yet the media got it wrong, it is not until today that they seem to be giving some clarity.

Last night, Budget Day, the media comment in summary was “Depreciation, here today gone tomorrow” In reality it is a very different storey. The media often takes a holistic approach which is fine for the majority, but to investors the details of the story is key!

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Depreciation – a detailed overview for a book publication

The basics.

As you have an interest in property investment you may have heard the term “Chattels Valuation”. Let’s clarify the term “Chattels Valuation”. I prefer to refer to it as a “Depreciation Apportionment” as what we are actually required to do by IRD is apportion the purchase price of your property into the various components and depreciation categories, this includes the land and buildings not just the chattels.

There are 3 main advantages that are marketed.

  • Maximise Depreciation
  • Minimise Depreciation Recovery
  • Reduce risk of IRD penalties

Let me explain what these mean to you.

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Now more than ever Commercial property owners want to PAY LESS TAX!

Many property owners mistakenly believe that with the reduction, announced in the 2010 budget, of the depreciation rate on buildings reducing to zero from the next tax year, that there will be no depreciation deductions available for the property.

While this is true for the “building” there still will be depreciation available on the “fit-out” of the property and the “plant”. How much will depend on their values and what options you advise your clients to take.

In August the IRD and Treasury published an Issues Paper to address unintentional negative impacts of the budget on non residential properties, and to propose legislation to implement the required law changes. While these proposals are not finalised at the moment it is widely believed they will be accepted by the government (maybe with some minor changes).


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