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Income Tax Act 2007

Timing and quantifying rules - Depreciation

EE 45: Consideration for purposes of section EE 44

You could also call this:

“How to calculate the value of business assets you sell or lose”

When you get money for something that used to be part of your business, you need to figure out how much you really got. This is called ‘consideration’ and it’s important for working out your taxes.

The amount you get is usually what someone pays you, not counting GST if you’re registered for it. But you can take away any costs you had when selling the thing.

Sometimes, the amount might be zero or even less than zero. That’s okay.

If someone pays you less than what the item is really worth, you have to use its real value (called market value) instead. But this doesn’t apply to some special situations, like when you give something to your partner.

If your item gets lost or stolen and you get insurance money, that’s the amount you use. If you’re registered for GST, you don’t count the GST part of the insurance money.

There are different rules for different situations, like when you stop using something for your business or when you sell a bunch of things together.

If you’re not sure how much you got for something, ask for help to make sure you’re doing it right.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1514651.

Topics:
Money and consumer rights > Taxes
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EE 44: Application of sections EE 48 to EE 51, or

“When these rules apply to valuable items you own”

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EE 46: Items for purposes of section EE 44, or

“List of property types eligible for depreciation claims when sold or disposed of”

Part E Timing and quantifying rules
Depreciation

EE 45Consideration for purposes of section EE 44

  1. For the purposes of section EE 44, the consideration equals the amount that a person derives excluding any GST charged if the person is a registered person, as modified by subsections (3) to (11) minus the amount (the disposal cost) that they incur in deriving that amount, to the extent to which the disposal cost—

  2. is not allowed as a deduction to the person other than as a deduction for an amount of depreciation loss; and
    1. is not counted in the amount that a person derives.

      1. All amounts deducted or deductible by the person under section 20(3) of the Goods and Services Tax Act 1985 in relation to the disposal cost described in subsection (1) are subtracted from the disposal costs under that subsection.

      2. For the purposes of section EE 44, the consideration may be zero or a negative amount.

      3. If the person has consideration that is not the item's market value, the amount that the person derives is the item’s market value. Three qualifications are—

      4. if the person makes a taxable supply, market value means the market value minus any GST that would be charged on the supply:
        1. this subsection does not apply to a transfer under a relationship agreement; and
          1. this subsection does not apply in a case described in any of subsections (5) to (10).

            1. Subsection (3) does not apply to a disposal of property to which any of sections FC 3 and FC 4 (which relate to the distribution or transmission of property) applies.

            2. The consideration that a person derives from the event described in section EE 47(2) is the item’s market value. Two qualifications are—

            3. if the person is a registered person, “market value” means the market value excluding the amount of GST that would have been charged if the market value is treated as being consideration received for a taxable supply by the person:
              1. this subsection does not apply to a transfer under a relationship agreement.

                1. The amount that a person derives from the event described in section EE 47(3) is the amount of insurance, indemnity, or compensation they receive for the loss or theft (amount A). If the person is a registered person, amount A does not include the amount, if any, of GST charged on amount A to the extent to which amount A is treated as being consideration received for a supply of services by the registered person under section 5(13) of the Goods and Services Tax Act 1985.

                2. The amount that a person derives from the event described in section EE 47(6) is the amount of the deduction for depreciation loss allowed under section EE 39(4).

                3. The amount that a person derives from the event described in section EE 47(4) is the total of the amount of insurance, indemnity, or compensation, and the amount of proceeds from the disposal, they receive for the affected item (amount A). If the person is a registered person, amount A does not include the amount, if any, of GST charged on amount A to the extent to which amount A is treated as being consideration received for a supply of services by the registered person under section 5(13) of the Goods and Services Tax Act 1985.

                4. The amount that a person derives from the event described in section EE 47(5) is the item’s cost minus the net amount paid. Two qualifications are—

                5. if the person is a registered person, the amount that a person derives does not include any GST charged on a taxable supply they make:
                  1. net amount paid means the amount paid by the buyer to the seller for the item under the contract minus any amount refunded by the seller to the buyer.

                    1. The amount that a person derives from the disposal of an item along with any other item, or from the occurrence of an event involving an item that also involves other items, is the item’s market value. Two qualifications are—

                    2. if the person makes a taxable supply, market value means the market value minus any GST that would be charged on the supply:
                      1. this subsection does not apply to a transfer under a relationship agreement.

                        1. The amount that a person derives from the event referred to in section EE 47(10) is described in section EZ 21(1) (Sections EE 45 and EE 47: permanent removal: allowance before 1 April 1995).

                        2. The amount that the person derives from the event referred to in section EE 47(11) is the adjusted tax value of the item before it is fitted as a replacement piece to an aircraft or aircraft engine as part of the aircraft engine overhaul.

                        Compare
                        Notes
                        • Section EE 45(1) heading: substituted (with effect on 1 April 2008), on , by section 52(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                        • Section EE 45(1): substituted (with effect on 1 April 2008), on , by section 52(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                        • Section EE 45(1B) heading: inserted (with effect on 1 April 2008), on , by section 52(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                        • Section EE 45(1B): inserted (with effect on 1 April 2008), on , by section 52(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                        • Section EE 45(2) heading: substituted (with effect on 1 April 2008), on , by section 52(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                        • Section EE 45(2): substituted (with effect on 1 April 2008), on , by section 52(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                        • Section EE 45(3): amended (with effect on 1 April 2008), on , by section 52(2) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                        • Section EE 45(5)(a): replaced, on , by section 164 of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                        • Section EE 45(6): amended (with effect on 1 April 2008), on , by section 52(3) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                        • Section EE 45(7): amended (with effect on 1 April 2008), on , by section 52(4) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                        • Section EE 45(8) heading: substituted (with effect on 4 September 2010), on , by section 25(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                        • Section EE 45(8): amended (with effect on 4 September 2010), on , by section 36(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                        • Section EE 45(8): amended (with effect on 4 September 2010), on , by section 25(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                        • Section EE 45(8): amended (with effect on 1 April 2008), on , by section 52(5) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                        • Section EE 45(9): amended (with effect on 1 April 2008), on , by section 52(6)(a) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                        • Section EE 45(9)(a): amended (with effect on 1 April 2008), on , by section 52(6)(b) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                        • Section EE 45(10): amended (with effect on 1 April 2008), on , by section 52(7) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                        • Section EE 45(11): amended (with effect on 1 April 2008), on , by section 52(8) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                        • Section EE 45(12) heading: inserted, on , by section 62(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                        • Section EE 45(12): inserted, on , by section 62(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                        • Section EE 45 list of defined terms adjusted tax value: inserted, on , by section 62(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                        • Section EE 45 list of defined terms aircraft engine: inserted, on , by section 62(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                        • Section EE 45 list of defined terms aircraft engine overhaul: inserted, on , by section 62(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).