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Income Tax Act 2007

Timing and quantifying rules - Depreciation

EE 54: Cost: GST

You could also call this:

“How GST affects the cost of depreciable property for tax purposes”

When you calculate the amount of depreciation loss or depreciation recovery income for an item of depreciable property, you need to consider how GST affects its cost.

The cost of the item is reduced by the amount of input tax that applies when you buy it. However, there are two exceptions to this rule.

You also need to reduce the item’s cost by any adjustment amount you take into account in the income year under section 20(3)(e) of the Goods and Services Tax Act 1985.

On the other hand, you need to increase the item’s cost by adding any amount of deductible output tax you have for the income year.

These rules help you figure out the true cost of the item for tax purposes, taking into account the effects of GST.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1514695.

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Part E Timing and quantifying rules
Depreciation

EE 54Cost: GST

  1. This section applies when an amount of depreciation loss or an amount of depreciation recovery income is calculated by reference to the cost of an item of depreciable property to a person.

  2. The item’s cost is reduced by subtracting the amount, if any, of input tax applying to the supply of the item to the person. This subsection is overridden by subsections (3) and (4).

  3. The item's cost is reduced by the amount of any adjustment taken into account in the income year under section 20(3)(e) of the Goods and Services Tax Act 1985.

  4. The item's cost is increased by adding an amount of deductible output tax that the person has for the income year.

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Notes
  • Section EE 54(2): amended, on , by section 54(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
  • Section EE 54(3) heading: substituted, on (applying to taxable supplies made on or after 1 April 2011), by section 54(2) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
  • Section EE 54(3): substituted, on (applying to taxable supplies made on or after 1 April 2011), by section 54(2) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
  • Section EE 54(4) heading: substituted, on (applying to taxable supplies made on or after 1 April 2011), by section 54(2) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
  • Section EE 54(4): substituted, on (applying to taxable supplies made on or after 1 April 2011), by section 54(2) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
  • Section EE 54 list of defined terms deductible output tax: inserted, on , by section 54(3) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
  • Section EE 54 list of defined terms taxable supply: repealed, on , by section 54(3) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).