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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 business assets that lose value over time"

Illustration for Income Tax Act 2007

When you dispose of some or all of your partner's interests in a partnership, this section applies. It applies to depreciable property that is not depreciable intangible property and costs $200,000 or less. The amount you get for the depreciable property is not included in your income. If you sell depreciable property to someone else, you cannot claim a deduction for it. The person buying it cannot claim a deduction for the amount they paid you. For tax purposes, the buyer is treated as if they originally acquired the property. This section does not apply to small partnerships if section HG 3(2) applies. Section HG 4 overrides this section.

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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 a person disposes of some or all of their partner’s interests in a partnership, 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. Section HG 4 overrides this section.

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 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 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).