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Income Tax Act 2007

Timing and quantifying rules - Depreciation - Definitions

EE 67: Other definitions

You could also call this:

“Definitions for calculating property value loss over time”

In this Act, you will find several important definitions related to depreciation and property:

A depreciation method is a way to calculate how much an item loses value over time. You can find out more about this in section EE 12.

The diminishing value method is when you subtract a set percentage from an item’s value each year to work out how much it has lost in value.

The diminishing value rate is the percentage you use when using the diminishing value method.

The economic rate is how quickly an item is expected to lose value in real terms. This is set by sections EE 27 to EE 30.

The estimated residual market value is how much you think an item will be worth at the end of its useful life, based on normal wear and tear.

Fixed life intangible property is something that can’t be touched but can lose value, and its legal life is expected to be the same as how long it will be useful.

An improvement is when you change or fix an item to make it worth more.

An international aircraft is a jet plane that’s mainly used to fly passengers between New Zealand and other countries.

Legal life is how long you legally own something, like a patent or the right to use land. This can vary depending on the type of property.

Petroleum-related depreciable property includes things like oil drilling rigs and support ships.

A pool is a group of items that you choose to depreciate together using the pool method.

The pool method is a way to calculate depreciation loss for a group of items, as explained in section EE 21.

A provisional rate is a temporary rate used for depreciation, as described in section EE 35.

Special excluded depreciable property means all buildings that are not listed in schedule 39.

A special rate is another type of depreciation rate, also described in section EE 35.

The straight-line method is when you subtract the same amount from an item’s value each year to work out how much it has lost in value.

The straight-line rate is the percentage you use when using the straight-line method.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1514741.

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Part E Timing and quantifying rules
Depreciation: Definitions

EE 67Other definitions

  1. In this Act,—

    depreciation method means a method described in section EE 12

      diminishing value method means the method of calculating an amount of depreciation loss for an item of depreciable property by subtracting, in each income year, a constant percentage of the item’s adjusted tax value from the item’s adjusted tax value

        diminishing value rate means the rate that a person using the diminishing value method applies to an item of depreciable property

          economic rate means the economic depreciation rate of an item of depreciable property, set under sections EE 27 to EE 30

            estimated residual market value means, for an item of depreciable property, its market value at the end of its estimated useful life, estimated reasonably as at the date of acquisition and based on an assumption of normal and reasonable maintenance over its estimated useful life

              fixed life intangible property means property that—

              1. is depreciable intangible property; and
                1. has a legal life that could reasonably be expected, on the date of the property’s acquisition, to be the same length as the property’s remaining estimated useful life

                  improvement means an alteration, extension, or repair of an item of depreciable property that increases its capital value

                    international aircraft means a jet-engined aircraft that a person uses in an income year mainly in regular commercial service to transport passengers between New Zealand and any other place

                      legal life,—

                      1. for an item to which paragraphs (b) to (d) do not apply, means the number of years, months, and days for which an owner’s interest in an item of intangible property exists under the contract or statute that creates the owner’s interest, assuming that the owner exercises any rights of renewal or extension that are either essentially unconditional or conditional on the payment of predetermined fees:
                        1. for an item that is a patent application, a design registration application, a patent, or a design registration, means the legal life under paragraph (a) that a patent or design registration would have if granted when the relevant application is first lodged:
                          1. for an item that is industrial artistic copyright, means the number of years, months, and days for which protection against copyright infringement is available as a result of section 75(1)(c) to (e) of the Copyright Act 1994:
                            1. for an item that is plant variety rights, means the total of—
                              1. the legal life that the rights would have under paragraph (a); and
                                1. the number of whole calendar months during which the person owns the plant variety rights application in relation to which the rights are granted:
                                2. for a person and a right (a land right) that is a leasehold estate, or a licence to use land, means the number of years, months, and days for which the person or an associated person has an owner's interest in the land right, or in a consecutive or successive land right, under the contract or statute that creates the owner's interest, determined—
                                  1. when the person acquires the owner's interest; and
                                    1. assuming that the person or associated person exercises rights of renewal, extension, or further grant that are either essentially unconditional or conditional on the payment of predetermined fees

                                    petroleum-related depreciable property means depreciable property that is—

                                    1. petroleum drilling rigs; or
                                      1. support vessels for offshore petroleum drilling rigs; or
                                        1. support vessels for offshore petroleum production platforms

                                          pool means items of depreciable property that a person chooses under section EE 12 to depreciate as a pool using the pool method

                                            pool method means the method of calculating an amount of depreciation loss set out in section EE 21

                                              provisional rate means a provisional rate as described in section EE 35

                                                special excluded depreciable property means all buildings that are not items specified in schedule 39 (Items for purposes of definition of special excluded depreciable property)

                                                  special excluded depreciable property

                                                    special rate means a special rate as described in section EE 35

                                                      straight-line method means the method of calculating an amount of depreciation loss for an item of depreciable property by subtracting, in each income year, a constant percentage of the item’s cost, to its owner, from the item’s adjusted tax value

                                                        straight-line rate means the rate that a person using the straight-line method applies to an item of depreciable property.

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                                                        Notes
                                                        • Section EE 67 legal life paragraph (a): amended, on , by section 68(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
                                                        • Section EE 67 legal life paragraph (b): replaced (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on , by section 128(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                                                        • Section EE 67 legal life paragraph (bb): inserted (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on , by section 128(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                                                        • Section EE 67 legal life paragraph (c)(ii): amended, on , by section 68(2) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
                                                        • Section EE 67 legal life paragraph (d): inserted, on , by section 68(3) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
                                                        • Section EE 67 special excluded depreciable property: inserted, on , by section 62(1) (and see section 62(2) for application) of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).
                                                        • Section EE 67 special excluded depreciable property: repealed, on , by section 12(1) (and see section 12(2) for application) of the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (2020 No 8).
                                                        • Section EE 67 list of defined terms building: inserted (with effect on 30 July 2009), on , by section 84 of the Taxation (Budget Measures) Act 2010 (2010 No 27).
                                                        • Section EE 67 list of defined terms design registration: inserted (with effect on 1 April 2015), on , by section 128(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                                                        • Section EE 67 list of defined terms design registration application: inserted (with effect on 1 April 2015), on , by section 128(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                                                        • Section EE 67 list of defined terms industrial artistic copyright: inserted (with effect on 1 April 2015), on , by section 128(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                                                        • Section EE 67 list of defined terms special excluded depreciable property: inserted, on (applying for the 2011–12 and later income years), by section 83(2) of the Taxation (Budget Measures) Act 2010 (2010 No 27).