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Leaky homes not eligible for depreciation deductions under new rules

The Inland Revenue Department (IRD) says leaky buildings will generally not be eligible for depreciation deductions in line with rules for other buildings with a useful life of 50-plus years.

Thursday, May 27th 2010, 12:00AM 1 Comment

by Sonia Speedy

In last week's Budget it was announced that from the 2011-12 income year, depreciation deductions on buildings with an estimated useful life of 50 years or more - including rental houses and offices - will no longer be allowed.

Currently property investors can claim depreciation of up to 3% of a building's purchase price. However, this benefit is clawed back at sale time if the value has not fallen.

When asked by Landlords.co.nz how it would be determined whether a property built in the 1950s, for example, would be fit for another 50 years or more, an IRD spokesperson said this is based on the Commissioner's interpretation statement on the meaning of "estimated useful life" as it relates to special depreciation rate rules.

The Commissioner's view is that the phrase focuses on the total life of an asset - not its remaining life from a given point in time. As a result, the "estimated useful life" of an asset, such as a building, is not reduced by the amount of time it is owned, or used, by someone else.

"The rules are about particular classes of assets, in this case buildings, as opposed to focusing on individual assets within that class," the spokesperson says.

Turning to leaky buildings, the spokesperson says they will generally have an estimated useful life of 50 years or more and therefore will not be eligible for depreciation deductions under the new rules.

"The categorisation for depreciation purposes does not depend on any circumstances relating to a given building," the spokesperson says.

Assets that are not part of a residential building itself can still be separated out and depreciated separately at the relevant rate.

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Comments from our readers

On 10 June 2010 at 11:49 am keith said:
Ambiguous legislation ,further complicated by the fact that many older buildings should be pulled down and replaced by more efficient ones. Seems quite an unjust interpretation and not one that logical thought would produce.
Commenting is closed

 

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Lender Flt 1yr 2yr 3yr
AIA 4.55 3.55 3.89 3.99
AIA Special - 3.05 3.39 3.69
ANZ 4.44 3.29 3.45 3.85
ANZ Special - 2.79 2.95 3.35
ASB Bank 4.45 ▼3.35 ▼3.19 ▼3.85
ASB Bank Special - ▼2.85 ▼2.69 ▼3.35
Bluestone 4.44 4.44 4.29 4.34
BNZ - Classic - ▼2.79 ▼2.69 ▼2.99
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 ▼3.39 ▼3.29 ▼3.59
Lender Flt 1yr 2yr 3yr
BNZ - TotalMoney 4.55 - - -
China Construction Bank 5.50 4.70 4.80 4.95
China Construction Bank Special - 2.80 3.15 3.19
Credit Union Auckland 5.95 - - -
Credit Union Baywide 5.65 4.75 4.75 -
Credit Union North 6.45 - - -
Credit Union South 5.65 4.75 4.75 -
Finance Direct - - - -
First Credit Union 5.85 3.99 4.49 -
Heartland 3.95 2.89 2.97 3.39
Heartland Bank - Online - - - -
Lender Flt 1yr 2yr 3yr
Heretaunga Building Society 4.99 4.35 4.45 -
HSBC Premier 4.49 2.80 2.89 3.50
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC ▼4.40 ▼2.95 ▼2.95 ▲3.69
Kainga Ora 4.43 ▼3.29 ▼3.39 ▼3.85
Kiwibank 4.40 3.74 4.14 4.40
Kiwibank - Capped - - - -
Kiwibank - Offset 4.40 - - -
Kiwibank Special - ▼2.65 ▼2.79 ▼3.25
Liberty 5.69 - - -
Lender Flt 1yr 2yr 3yr
Napier Building Society - - - -
Nelson Building Society 4.95 3.75 3.99 -
Pepper Essential 5.18 - 4.98 4.98
Resimac 3.49 3.45 3.39 3.69
RESIMAC Special - - - -
SBS Bank 4.54 4.85 5.05 5.49
SBS Bank Special - 2.99 3.05 3.69
The Co-operative Bank - Owner Occ 4.40 ▼2.79 ▼2.95 ▼3.39
The Co-operative Bank - Standard 4.40 ▼3.29 ▼3.45 ▼3.89
TSB Bank 5.34 3.59 ▼3.59 4.19
TSB Special 4.54 2.79 ▼2.79 3.39
Lender Flt 1yr 2yr 3yr
Wairarapa Building Society 4.99 3.95 3.99 -
Westpac 4.59 4.15 4.09 4.49
Westpac - Offset 4.59 - - -
Westpac Special - ▼2.79 ▼2.69 ▼2.79
Median 4.55 3.32 3.39 3.69

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