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Depreciation Loading Changes in Budget

(PR.co.nz)

What is changing?
* Businesses will no longer be able to claim 20 per cent accelerated depreciation on new plant and equipment.
* This change will apply to assets purchased after Budget day. The old rules will continue to apply for assets purchased before this date.

Why?
* The 20 per cent depreciation loading distorts people’s decisions about what capital assets to invest in. For example, if a business buys a new car or computer, it gets the advantage of the depreciation loading but not if it buys a second-hand piece of machinery. These sorts of distortions have a real cost to the economy.
* The 20 per cent loading also means some projects which don’t stack up on their own merits are taking place, because they are effectively being subsidised by taxpayers.

Key facts
* Because of the 20 per cent loading, New Zealand’s overall depreciation allowances are more generous than in most other developed countries.
* The removal of the 20 per cent loading is part of a package of measures to widen the business tax base while lowering overall rates.
* These changes will raise $135 million in 2010/11, rising to $345 million in 2013/14.

More information
* A special report explaining the relevant amendments will be available on Inland Revenue’s Policy Advice Division website at www.taxpolicy.ird.govt.nz after Budget day legislation is introduced.

Media Release from Hon Bill English, Minister of Finance.

 



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