21 February 2017
Depreciation rollover relief for quake victims
Businesses in the upper South Island and Greater Wellington areas hit by last year’s earthquake and aftershocks will be able to replace assets lost in the earthquake without immediately incurring a tax bill, Revenue Minister Judith Collins said today.
A Supplementary Order Paper to the Taxation (Annual rates for 2016-17, Closely Held Companies, and Remedial Matters) Bill released today by Ms Collins provides roll-over relief for depreciation recovery.
“When an insured asset is destroyed it is deemed to be sold and this results in depreciation recovery for the asset owner — an unexpected windfall. That windfall is taxable, which means that those businesses trying to get back on their feet would face an unexpected tax bill.
“Businesses and their tax agents in the affected areas have asked Government to address this. The Government agrees that this tax outcome would present a significant hurdle for businesses.
“The Supplementary Order Paper therefore provides rollover relief allowing businesses affected by the quakes to defer depreciation recovery income. The intention is that the provision will be retrospective in effect to cover the current tax year,” Ms Collins says.
The Supplementary Order Paper is available on Inland Revenue's policy website at www.taxpolicy.ird.govt.nz