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New Zealand law explained for everyone

Income Tax Act 2007

Timing and quantifying rules - Depreciation

EE 18: Cost: change from diminishing value to straight-line method

You could also call this:

“How to adjust cost when switching depreciation methods”

When you change how you calculate depreciation for something you own from the diminishing value method to the straight-line method, there’s a special rule you need to follow. This rule applies when you make this change for any item of property in a particular year.

For the calculations you need to do, you’ll treat the cost of the item as being the same as its adjusted tax value at the end of the year before. This adjusted tax value is the amount you get before you take away any depreciation loss for the item in the current year.

When you’re doing these calculations, you’ll use the formulas found in sections EE 16 and EE 17. These sections will help you figure out the right numbers to use.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1514554.

Topics:
Money and consumer rights > Taxes
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EE 18B: Cost: some depreciable intangible property, or

“How to calculate the cost of certain intangible assets”

Part E Timing and quantifying rules
Depreciation

EE 18Cost: change from diminishing value to straight-line method

  1. This section applies when a person changes from the diminishing value method to the straight-line method for an item of property for an income year.

  2. For the purposes of the formulas in sections EE 16 and EE 17, the item’s cost is treated as being the item’s adjusted tax value at the end of the income year before the deduction of an amount of depreciation loss for the item for the income year.

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