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Income Tax Act 2007

Taxation of certain entities - Joint venturers, partners, and partnerships

HG 7: Disposal of depreciable property

You could also call this:

"Selling partnership assets worth $200,000 or less: what you need to know"

When you are in a partnership and you sell some or all of your share to another partner, this section applies if the things you are selling cost $200,000 or less and are not intangible property. The amount you get for the things you sell is not counted as income for you. You cannot claim any deductions for the things you sold.

If you buy some or all of a partner's share in a partnership, you are treated as if you originally bought the things that were part of the share. You cannot claim a deduction for the amount you paid for the things. This section does not apply if section HG 3(1) or section HG 3(2) applies to the partnership.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1185078.

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Part HTaxation of certain entities
Joint venturers, partners, and partnerships

HG 7Disposal of depreciable property

  1. This section applies when an exiting partner disposes of some or all of their partner’s interests in a partnership to an entering partner, to the extent to which those interests include an item of depreciable property that is not depreciable intangible property, and the total cost of the item when it was first acquired by the partners of the partnership is $200,000 or less.

  2. The amount of consideration paid or payable to the exiting partner for the depreciable property is excluded income of the exiting partner.

  3. The exiting partner is denied any deduction in relation to the depreciable property for the income year in which the disposal of the depreciable property occurs and later income years, to the extent to which the entering partner is allowed a deduction because of subsection (5).

  4. The entering partner is denied any deduction for the amount of consideration paid or payable to the exiting partner for the depreciable property.

  5. For the purposes of calculating the income tax liability of an entering partner for the part of the income year after the disposal of the depreciable property occurs and later income years (the post-disposal periods), the entering partner is treated for the post-disposal periods as if they had originally acquired and held the depreciable property, not the exiting partner.

  6. This section does not apply for the partners of a small partnership if section HG 3(2) applies.

  7. This section does not apply for the partners of a partnership if section HG 3(1) applies.

Notes
  • Section HG 7: inserted, on , by section 19(1) of the Taxation (Limited Partnerships) Act 2008 (2008 No 2).
  • Section HG 7(1): amended, on , by section 80(1)(a) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
  • Section HG 7(1): amended, on , by section 80(1)(b) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
  • Section HG 7(1): amended, on , by section 136(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
  • Section HG 7(6): amended (with effect on 1 April 2008), on , by section 273(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
  • Section HG 7(7) heading: replaced (with effect on 1 April 2008), on , by section 80(2) (and see section 80(4) for application) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
  • Section HG 7(7): replaced (with effect on 1 April 2008), on , by section 80(2) (and see section 80(4) for application) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
  • Section HG 7 list of defined terms amount: inserted, on , by section 80(3) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
  • Section HG 7 list of defined terms exiting partner: inserted, on , by section 136(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
  • Section HG 7 list of defined terms income year: inserted, on , by section 80(3) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
  • Section HG 7 list of defined terms pay: inserted, on , by section 80(3) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).