Removing the remnants of depreciation loading

(Clauses 22 and 60)

Summary of proposed amendment

As part of Budget 2010, it was announced that depreciation loading would be removed on a prospective basis from 21 May 2010. Depreciation loading was a policy that increased the amortisation rate of most depreciable assets by 20%.

When depreciation loading was first introduced, a 20% loading was also applied to two special amortisation regimes: one that applies to certain horticultural plants and one that applies to certain land improvements made by a person involved in an agricultural business (such as a farmer). Due to an oversight, this loading was not removed from these two special regimes as part of Budget 2010.

To correct this, it is proposed that this loading be removed on a prospective basis from the date the bill is introduced. Taxpayers who have purchased or planted, or were committed to purchasing or planting, relevant assets or plants on or before this date will continue to be able to apply the loading. The loading will cease to apply to assets purchased thereafter.

This application date is necessary to prevent taxpayers from bringing forward expenditure on relevant assets or plants to take advantage of the loading before its repeal.

Note that the amortisation rate for the regressing and fertilising of pasture (schedule 20, part A, row 2) is not being changed as it does not have the loading.

Application date

The amendment will apply on a prospective basis from the day the bill is introduced.