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Income Tax Act 2007

Timing and quantifying rules - Terminating provisions

EZ 18: Section EZ 17 amount of depreciation loss when items transferred between companies in wholly-owned group before 1 April 1993

You could also call this:

“Depreciation rules for items sold between related companies before April 1993”

If you owned a company that was part of a group of companies all owned by the same people, and you sold something valuable to another company in that group before 1 April 1993, this law might apply to you.

When you sell something like this, the company that buys it can claim money back for wear and tear on the item, just as if they had owned it all along. This is called depreciation loss.

The company that buys the item can claim depreciation loss as if they were the same as the company that sold it. However, the selling company can’t claim depreciation loss for the year they sold it. Instead, this amount is taken away from what the buying company can claim.

This rule applies even if the definitions of certain terms like ‘new asset’ or ‘qualifying improvement’ say that only one specific company can claim for these things. In this case, both companies can be treated as if they were the same when it comes to claiming depreciation loss.

This law is found in section EZ 17 of the Income Tax Act 2007.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1516044.

Topics:
Money and consumer rights > Taxes
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EZ 17: Additional amount of depreciation loss: between 16 December 1991 and 1 April 1994, or

“Extra wear and tear deduction for certain assets purchased or improved from late 1991 to early 1994”

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EZ 19: Section EZ 17 amount of depreciation loss when person previously exempt from tax acquires item, or

“Calculating depreciation for items acquired when you were tax-exempt”

Part E Timing and quantifying rules
Terminating provisions

EZ 18Section EZ 17 amount of depreciation loss when items transferred between companies in wholly-owned group before 1 April 1993

  1. This section applies when, before 1 April 1993, a company in a wholly-owned group of companies disposes of a qualifying asset, or an item to which the company has made a qualifying improvement, to another company in the same wholly-owned group.

  2. The transferee company has an amount of depreciation loss under section EZ 17 for the period after the disposal as if the transferee company were the same person as the transferor company.

  3. The amount of depreciation loss that the transferor company has under section EZ 17 for the asset or item for the income year in which the disposal occurs must be subtracted when the amount of depreciation loss that the transferee company has under section EZ 17 for the income year is calculated.

  4. This section applies despite any limitations in the definitions of new asset, New Zealand-new asset, qualifying asset, qualifying capital value, and qualifying improvement as to the identity of the person for whom an asset or item or improvement will be treated as a qualifying asset or qualifying improvement.

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