Plain language law

New Zealand law explained for everyone

 Plain Language Law homepage
Back to
EZ 26: Meaning of qualifying capital value
or “How to work out the value of certain business assets for tax purposes”
You could also call this:

“What qualifies as an improvement to an item for tax purposes”

A qualifying improvement is something you do to make an item you own better. For it to count as a qualifying improvement, you need to follow these rules:

You must have spent money on the improvement between 16 December 1991 and 31 March 1993, but not if you agreed to do it before 16 December 1991. Or, you could have spent the money between 1 April 1993 and 31 March 1994, but only if you agreed to do it between 16 December 1991 and 31 March 1993.

You need to have used the improved item before 1 April 1994.

You must be allowed to claim a deduction for wear and tear (depreciation) on the improvement under the Income Tax Act 1976 for that year.

Some things don’t count as qualifying improvements. These include:

Improvements to buildings.

Improvements that need construction, if the construction started before 16 December 1991, or if you agreed to start it before that date. It also doesn’t count if the construction wasn’t finished before 1 April 1994, or if you didn’t use the improved item before 1 April 1994.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

Next up: EZ 28: Meaning of qualifying asset

or “Assets eligible for depreciation deductions, excluding buildings and some cars”
Next

Part E Timing and quantifying rules
Terminating provisions: Definitions

EZ 27Meaning of qualifying improvement

  1. Qualifying improvement, for a person’s income year, means an improvement of an item that the person owns, if all the following apply:

  2. the person incurred the expenditure on the improvement—
    1. in the period starting on 16 December 1991 and ending with the close of 31 March 1993, other than under a binding contract they entered into before 16 December 1991; or
      1. in the period starting on 1 April 1993 and ending with the close of 31 March 1994, under a binding contract they entered into in the period starting on 16 December 1991 and ending with the close of 31 March 1993; and
      2. the person used the item in its improved form before 1 April 1994; and
        1. the person is allowed a deduction for depreciation under the Income Tax Act 1976 for the improvement for the income year.

          1. Qualifying improvement does not include—

          2. an improvement to a building; or
            1. an improvement requiring construction, if—
              1. the construction started before 16 December 1991; or
                1. the construction started on or after 16 December 1991 under a binding contract that the person entered into before 16 December 1991; or
                  1. the construction was not completed before 1 April 1994; or
                    1. the improvement was not first used by the person before 1 April 1994.

                    Compare