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Income Tax Act 2007

Timing and quantifying rules - Terminating provisions

EZ 23BA: Aircraft acquired before 2017–18 income year: adjusted tax value, base value, reduced; total deductions increased

You could also call this:

“Aircraft purchased before 2017-2018: adjusting value and deductions for engine overhauls”

This law applies to you if you bought an aircraft engine or an aircraft with an engine before the 2017-2018 tax year. It’s also for you if you need to do engine overhauls when you use the aircraft, and if the cost of these overhauls was included in the value of the engine or aircraft for tax purposes.

If this applies to you, the value of your aircraft engine or aircraft will be lowered at the start of the 2017-2018 tax year. This is because the cost of the engine overhaul will be taken out of the value.

The law also changes how much you can claim as a deduction for your aircraft engine or aircraft. The amount you can claim will be increased by the difference between two calculations related to the overhaul cost.

When working out these changes, you need to be fair and reasonable. You should think about how deductions for aircraft engines and overhauls are usually calculated, and look at how much overhauls usually cost compared to the price of similar aircraft and engines.

This law doesn’t apply if you chose to use a different rule (section EJ 26) for the 2017-2018 tax year about how to spread out the cost of aircraft engine overhauls.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM7281588.

Topics:
Money and consumer rights > Taxes
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EZ 23: Economic rate for plant or equipment acquired before 1 April 2005 and buildings acquired before 19 May 2005, or

“How to calculate depreciation rates for older property and equipment”

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EZ 23B: Property acquired after depreciable property affected by Canterbury earthquakes, or

“Delaying tax on earthquake insurance payouts for replacement property”

Part E Timing and quantifying rules
Terminating provisions

EZ 23BAAircraft acquired before 2017–18 income year: adjusted tax value, base value, reduced; total deductions increased

  1. This section applies when—

  2. a person, before the 2017–18 income year, acquires an aircraft engine or an aircraft including an unpriced aircraft engine; and
    1. the person is required to perform aircraft engine overhauls on the aircraft engine when operating an aircraft; and
      1. for the purposes of section EE 56 (Formula), the item base value used to calculate the adjusted tax value of the aircraft engine or aircraft for income years before the 2017–18 income year includes an amount corresponding to the cost of an aircraft engine overhaul of the aircraft engine; and
        1. the person does not make an election under section EJ 26 (Allocation of expenditure on aircraft engine overhauls: election by operator of single aircraft) for the 2017–18 income year.

          1. The item base value referred to in subsection (1)(c) for the aircraft engine or aircraft is reduced at the beginning of the 2017–18 income year by the included amount referred to in that paragraph.

          2. The adjusted tax value of the aircraft engine or aircraft is reduced at the beginning of the 2017–18 income year by the proportion of the adjusted tax value that corresponds to the depreciated cost to the person of the aircraft engine overhaul referred to in subsection (1)(c).

          3. For the purposes of section EE 60, an amount equal to the difference between the reduction required by subsection (2) and the reduction required by subsection (3) is included as a decrease in the item total deductions for the aircraft engine or aircraft.

          4. For the purposes of subsections (2) and (3), the proportion of the base value or adjusted tax value that corresponds to the cost or depreciated cost to the person of the aircraft engine overhaul is the amount that is fair and reasonable, taking into consideration—

          5. the principles used in determining the amount of a deduction allowed under section DW 5 (Aircraft operators: aircraft engines and aircraft engine overhauls) for an aircraft engine or aircraft in the 2017–18 or a later income year:
            1. historical figures for the cost of an aircraft engine overhaul as a proportion of the cost of a similar aircraft and engine.

              Notes
              • Section EZ 23BA: inserted, on (applying for the 2017–18 and later income years), by section 91(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
              • Section EZ 23BA(4): replaced, on (with effect on 1 April 2017 and applying for the 2017–18 and later income years), by section 92(1) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).