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Income Tax Act 2007

Timing and quantifying rules - Depreciation

EE 3: Ownership of goods subject to reservation of title

You could also call this:

“Delayed ownership for items bought on credit”

When you agree to buy something that can lose value over time, like a machine or equipment, there are special rules about who owns it before you finish paying for it. These rules apply when:

You make a firm agreement to buy the item, but it’s not a hire purchase deal. The agreement follows some specific laws about contracts. You don’t officially own the item until you’ve paid for it completely, but you’re allowed to have and use it before then.

In this situation, even though you haven’t finished paying, you’re treated as if you own the item. The person selling it to you is treated as if they don’t own it anymore. This starts from when you make the agreement or when you first get to use the item, whichever happens later.

This arrangement stops when you finish paying and officially own the item, or if the seller takes it back because you couldn’t pay.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1514500.

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EE 2: Nature of ownership of item, or

“Explaining what it means to own something that can lose value”

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EE 4: Ownership of lessee’s improvements: lessee, or

“Renters are treated as owners of improvements they make to rented land”

Part E Timing and quantifying rules
Depreciation

EE 3Ownership of goods subject to reservation of title

  1. This section applies when—

  2. a person (the buyer) enters into an unconditional contract to buy an item of depreciable property; and
    1. the contract is not a hire purchase agreement and the item is not a hire purchase asset that is the subject of a hire purchase agreement; and
      1. the contract is subject to Part 3, subparts 1 to 6 of the Contract and Commercial Law Act 2017; and
        1. title to the item does not pass until the purchase price is paid in full; and
          1. the buyer takes possession of the item before title to it passes.

            1. The buyer is treated as owning, and the seller is treated as not owning, the item from the later of the following times:

            2. the time at which the buyer enters into the contract; and
              1. the time at which the buyer takes possession of the item.

                1. Subsection (2) ceases to apply when 1 of the following occurs:

                2. title to the item passes to the buyer; or
                  1. the seller repossesses the item.

                    Compare
                    Notes
                    • Section EE 3(1)(c): amended, on , by section 347 of the Contract and Commercial Law Act 2017 (2017 No 5).