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Income Tax Act 2007

Recharacterisation of certain transactions - Transfers of relationship property

FB 21: Depreciable property

You could also call this:

“Rules for transferring property you can claim depreciation on during a relationship split”

When you’re allowed to deduct depreciation loss for an item of property and you transfer it as part of a relationship property settlement, here’s what happens:

The transfer is treated as if you sold and bought the item. The price is either what you paid for it (if you got it in the same year you’re transferring it) or its adjusted tax value at the start of the transfer year.

The person receiving the item can claim depreciation loss from the day they get it, even if you haven’t claimed any. They’re treated as if they’ve had the same amount of depreciation loss you’ve had in previous years. But they can’t claim more than you would have if you’d kept the item.

For buildings, the new owner’s depreciation loss is based on what you originally paid for the building.

If you’ve made changes to the item in the transfer year (like improvements), it’s treated as if the new owner made those changes.

When working out the depreciation rate, if the item was new or unused when you got it, or if it’s a building that hadn’t been lived in before, it’s treated as if that’s still true when it’s transferred.

Section EE 31(2)(b) and EZ 23(4) have more information about depreciation rates for new assets.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1516370.

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Part F Recharacterisation of certain transactions
Transfers of relationship property

FB 21Depreciable property

  1. This section applies when a person who is allowed a deduction for an amount of depreciation loss for an item of property transfers the item on a settlement of relationship property.

  2. Repealed

  3. The transfer is treated as a disposal and acquisition for an amount equal to, as applicable,—

  4. if the transferor acquired the item in the year of transfer, the cost of the item to them; or
    1. in any other case, the adjusted tax value of the item measured at the start of the year of transfer.

      1. In relation to amounts of depreciation loss for the item, the transferee—

      2. has an amount of depreciation loss for the item from the date of transfer, whether or not the transferor has in fact had an amount of depreciation loss:
        1. is treated as having had an amount of depreciation loss equal to all amounts of depreciation loss that the transferor had for the item in income years before the year of transfer:
          1. does not have a greater amount of depreciation loss than that which the transferor would have had if they had kept the item.

            1. If the item is a building, the transferee’s amount of depreciation loss must be determined having regard to the original cost of the building to the transferor.

            2. If the item has been acquired, erected, installed, altered, extended, improved, or attached by the transferor in the year of transfer, the item is treated as if it were acquired, erected, installed, altered, extended, improved, or attached by the transferee in the income year.

            3. For the purposes of determining the rate that applies to the item under section EE 31(2)(b) or EZ 23(4) (which relate to depreciation rates for new assets), if either of the following conditions applied to the item when the transferor acquired or erected it, the condition is treated as applying to the item at the date of transfer:

            4. the item had not previously been used by a person, or acquired or held by a person for their use; and
              1. if the item is a building or part of a building, it had not previously been occupied.

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                Notes
                • Section FB 21(2) heading: repealed, on , pursuant to section 70(1) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
                • Section FB 21(2): repealed, on , by section 70(1) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
                • Section FB 21 list of defined terms property: inserted, on , by section 243 of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                • Section FB 21 list of defined terms resident mining operator: repealed, on , by section 70(2) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).