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Income Tax Act 2007

Timing and quantifying rules - Depreciation

EE 6: What is depreciable property?

You could also call this:

“Property that loses value over time when used for business or taxable activities”

Depreciable property is something that you might expect to lose value over time when you use it or have it ready to use. This can happen when you’re making money that can be taxed, running a business to make money that can be taxed, or doing research and development work that doesn’t get taxed.

If you can touch the property and it fits this description, it’s depreciable property. But there are some exceptions, which you can find in section EE 7.

For this part of the law, things like power lines or water pipes that distribute utilities are treated as separate items of property.

If you can’t touch the property (like a patent or copyright), it can still be depreciable if it’s considered “depreciable intangible property”, fits the description above, and isn’t one of the exceptions in section EE 7.

If you own a geothermal well, the law treats it as depreciable property for a certain time while you’re proving it can produce geothermal energy. During this time, it’s treated as if you’re using it in a business to make money that can be taxed.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1514508.

Topics:
Money and consumer rights > Taxes
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Part E Timing and quantifying rules
Depreciation

EE 6What is depreciable property?

  1. Depreciable property is property that, in normal circumstances, might reasonably be expected to decline in value while it is used or available for use—

  2. in deriving assessable income; or
    1. in carrying on a business for the purpose of deriving assessable income; or
      1. in deriving exempt income, and it is used in performing research and development activities.
          1. Subsections (2) to (4) expand on this subsection.

        1. An item of tangible property is depreciable property if—

        2. it is described by subsection (1); and
          1. it is not described by section EE 7.

            1. For the purposes of this subpart, utilities distribution assets are separate items of property.

            2. An item of intangible property is depreciable property if—

            3. it is within the definition of depreciable intangible property; and
              1. it is described by subsection (1); and
                1. it is not described by section EE 7.

                  1. For the purposes of this subpart, a person who owns a geothermal well is, for the geothermal energy proving period, treated as acquiring the well as property that declines in value and is to be available for use in carrying on a business for the purpose of deriving assessable income.

                  Compare
                  Notes
                  • Section EE 6(1)(b): amended, on , by section 6(1) (and see section 3 for application) of the Taxation (Research and Development Tax Credits) Act 2019 (2019 No 15).
                  • Section EE 6(1)(c): inserted, on , by section 6(1) (and see section 3 for application) of the Taxation (Research and Development Tax Credits) Act 2019 (2019 No 15).
                  • Section EE 6(2B) heading: inserted (with effect on 1 April 2008), on , by section 50(1) (and see section 50(3) for application) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
                  • Section EE 6(2B): inserted (with effect on 1 April 2008), on , by section 50(1) (and see section 50(3) for application) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
                  • Section EE 6 list of defined terms research and development activities: repealed (with effect on 1 April 2019), on , by section 78 of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
                  • Section EE 6 list of defined terms research and development activity: inserted (with effect on 1 April 2019), on , by section 78 of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
                  • Section EE 6 list of defined terms utilities distribution asset: inserted (with effect on 1 April 2008), on , by section 50(2) (and see section 50(3) for application) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).