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Income Tax Act 2007

Timing and quantifying rules - Depreciation - Definitions

EE 63: Meaning of estimated useful life

You could also call this:

“How long you can use property to make money before it wears out or becomes outdated”

When you have something that can be used to make money, like a tool or a machine, it’s called ‘depreciable property’. The ‘estimated useful life’ of this property is how long you can expect to use it to make money.

For most things, you need to think about how time passing, wear and tear, and getting old or outdated might affect it. You also need to assume that you’ll take good care of it.

For copyrights in sound recordings, like music, it’s a bit different. The ‘estimated useful life’ starts when you first use it to make money. It ends in the tax year when you expect to have made 90% of all the money you’ll ever make from 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=DLM1514727.

Topics:
Money and consumer rights > Taxes
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Part E Timing and quantifying rules
Depreciation: Definitions

EE 63Meaning of estimated useful life

  1. Estimated useful life, for an item of depreciable property, other than a copyright in a sound recording, means the period over which the item might reasonably be expected to be useful in deriving assessable income or carrying on a business for the purpose of deriving assessable income, taking into account—

  2. the passage of time, likely wear and tear, exhaustion, and obsolescence; and
    1. an assumption of normal and reasonable maintenance.

      1. Estimated useful life, for a copyright in a sound recording, means the period from the time at which the copyright might reasonably be expected to be first useful in deriving assessable income until the end of the income year in which it might reasonably be expected that 90% of all the income that will be derived from it has been derived.

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