Back in May 2010 the government announced that buildings with useful lives of 50 years or more would be subject to a zero percent depreciation rate and followed this with an IRD interpretation statement.
The Taxation (GST and Remedial Matters) Act 2010 continues to give effect to this intention, but amends it to ensure that taxpayers can still claim depreciation on the fitout of commercial and industrial buildings and the 20% depreciation loading where they entered into binding investment decisions on or before 20 November 2010. In other words, they’ve introduced some transitional provisions.
Residential fitout remains generally non-depreciable as per the IRD interpretation statement IS10/01. Fitout depreciation rules for commercial building owners are complex. Shared residential and commercial purpose buildings follow the dominant use. There are also a number of buildings that provide residential type accommodation which are excluded from the meaning of dwelling (for which depreciation is non-applicable) such as hotels, motels, boarding houses, nursing homes, camping grounds, resthomes/retirement villages and hospitals.
Those rules take effect from 1 April 2011, so this may be an opportune time to consider the effects, particularly when coupled with the transition from LAQCs to LTCs or other structures.
While we are happy to give this heads up and discuss the issues in broad terms, in the first instance we recommend you discuss the changes to depreciation with your Accountant (if you don’t have one, we can certainly recommend some).