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Income Tax Act 2007

Timing and quantifying rules - Depreciation

EE 22: Cases affecting pool

You could also call this:

“How the value of your pool of assets changes when you add, remove, or sell items”

If you choose to add a new item to your pool of property in a year, you increase the pool’s value by the cost of that item.

If you decide to add an item to your pool that you used to count separately last year, you increase the pool’s value by how much that item was worth when you added it. You also need to include its value from the end of last year in your starting value for this year.

If you get money from insurance for damage to an item in your pool, and it’s more than what you spent to fix it, you take away the extra money from the pool’s value.

When you sell an item from your pool, or get money for it being damaged before you sold it, you take away any extra money you made from the pool’s value.

If at the end of the year your pool still has value but you’ve sold everything in it, you count that leftover value as a loss for that year. The next year, your pool starts at zero.

If at the end of the year your pool’s value is less than zero, you count that negative amount as income for that year. The next year, your pool starts at zero.

There’s a special rule that limits how much income you can get this way if you used a specific method to count your pool items in the 1992-93 year.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1514571.

Topics:
Money and consumer rights > Taxes
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EE 21: Pool method: calculating amount of depreciation loss, or

“How to work out the yearly value loss for a group of depreciating items”

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EE 23: Combined pools, or

“Combining multiple asset pools into a single pool”

Part E Timing and quantifying rules
Depreciation

EE 22Cases affecting pool

  1. If a person chooses in an income year to include in a pool an item of poolable property that they acquire in the income year, the pool’s adjusted tax value is increased by the item’s cost.

  2. If a person chooses in an income year to include in a pool an item of poolable property that they depreciated separately in the previous income year,—

  3. the pool’s adjusted tax value is increased by the item’s adjusted tax value on the date it is included in the pool; and
    1. the item’s adjusted tax value at the end of the previous income year is included in starting adjusted tax value in section EE 21(5).

      1. If a person in an income year derives an amount of insurance, indemnity, or compensation (the compensation amount) for damage to an item included in a pool at the end of the income year and the compensation amount exceeds the expenditure or loss that the person incurs because of the damage, the excess is subtracted from the adjusted tax value of the pool.

      2. If a person disposes of an item included in a pool, and derives an amount of consideration from the disposal, or derives an amount of insurance, indemnity, or compensation to which subsection (2B) does not apply for damage to the item occurring before the disposal, any excess of the amount derived over the expenditure or loss incurred in deriving the amount is subtracted from the adjusted tax value of the pool in which the item was included on the date of the disposal.

      3. If, on the last day of an income year, the adjusted tax value of a person’s pool is positive but the person has disposed of all items that were in the pool,—

      4. the amount of depreciation loss that the person has for the pool for the income year is the pool’s adjusted tax value; and
        1. on the first day of the following income year, the pool’s adjusted tax value is zero.

          1. If, on the last day of an income year, the adjusted tax value of a person’s pool is negative,—

          2. the amount by which the adjusted tax value is negative is an amount of depreciation recovery income of the person derived in the income year; and
            1. on the first day of the following income year the pool’s adjusted tax value is zero.

              1. Section EZ 10 (Pool items accounted for by globo method for 1992–93 income year) limits the amount of income arising under subsection (5)(a) in the circumstances described in the section.

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              Notes
              • Section EE 22(2B) heading: inserted (with effect on 4 September 2010), on , by section 35(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
              • Section EE 22(2B): inserted (with effect on 4 September 2010), on , by section 35(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
              • Section EE 22(3): amended (with effect on 4 September 2010), on , by section 35(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).