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New Zealand law explained for everyone

Income Tax Act 2007

Timing and quantifying rules - Depreciation

EE 8: Election that property not be depreciable

You could also call this:

“Choosing not to claim depreciation on property”

You can choose that something you buy or own isn’t depreciable property, even if it normally would be. This means you won’t be able to claim a deduction for its loss in value over time.

You can make this choice when you first get the item, or later if its use changes. If you’ve never claimed any deductions for the item’s depreciation, you can even choose to make it non-depreciable after you’ve owned it for a while.

To make this choice, you need to tell the tax department (the Commissioner) about it in your tax return. When you do this depends on when you’re making the choice:

  • If it’s when you first get the item, you tell them in that year’s tax return.
  • If it’s when the item’s use changes, you tell them in that year’s tax return.
  • If it’s for an item you’ve had for a while, you can tell them in any year’s tax return, even after you’ve gotten rid of the item.

Once you make this choice, it applies for that tax year and all future years until you get rid of the item or something happens to it as described in section EE 47.

If you choose to make an item non-depreciable after owning it for a while, this choice also applies to all the past years you’ve owned it.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1514515.

Topics:
Money and consumer rights > Taxes
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EE 7: What is not depreciable property?, or

“Items you can't claim depreciation on for tax purposes”

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EE 9: Description of elements of calculation, or

“Elements involved in calculating depreciation loss”

Part E Timing and quantifying rules
Depreciation

EE 8Election that property not be depreciable

  1. A person may choose that an item of property they acquire not be depreciable property even though, in the absence of the election, it would be depreciable property.

  2. A person may choose that an item of property they own ceases to be depreciable property if—

  3. the use of the item changes; and
    1. before the use changes, the person was denied a deduction for an amount of depreciation loss for the item; and
      1. after the use changes, in the absence of the election, the person would have been allowed a deduction for an amount of depreciation loss for the item.

        1. A person who has deducted none of the amounts of depreciation loss for which they were allowed a deduction for an item of property, in the income year in which they acquired it and in each later year, may retrospectively choose that the item not be depreciable property.

        2. An election under this section is made as follows:

        3. a person makes an election under subsection (1) by giving the Commissioner notice of it in their return of income for the income year in which they acquire the item; and
          1. a person makes an election under subsection (2) by giving the Commissioner notice of it in their return of income for the income year in which the item’s use changes; and
            1. a person makes an election under subsection (3) by giving the Commissioner notice of it in their return of income for any income year after they acquire the item, including an income year after they dispose of the item.

              1. An election under this section has effect for the person for—

              2. the income year for which they make the election; and
                1. all later income years until—
                  1. the item is disposed of, although this reference to disposal does not include the disposal of an item of intangible property as part of an arrangement to replace it with an item of the same kind; or
                    1. an event described in section EE 47 occurs involving the item.

                    2. An election made under subsection (3) also has retrospective effect for the person for—

                    3. the income year in which they acquire the property; and
                      1. all intervening income years until the year in which they make the election.

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