Primary sector asset amortisation - subpart DO

Clauses 18, 23

The bill contains specific generic proposals to better align the primary sector amortisation rules in subpart DO of the Income Tax Act 2007 with the ordinary depreciation rules. The amendments are a result of a more detailed analysis of this subpart as a result of the kiwifruit PSA virus outbreak that has decimated the main Kiwifruit Gold variety and has potentially affected other kiwifruit.

Submission

(New Zealand Institute of Chartered Accountants, Ernst & Young)

To remove doubt, the proposed amendment should explicitly state that the rendering useless of the kiwifruit as a consequence of the kiwifruit PSA virus is not an action of the taxpayer.

Comment

The submission concerns the scope of the proposed amendment. As introduced, the amendment is prescriptive and may be interpreted as not allowing a deduction when the orchardist has removed the kiwifruit as a precautionary measure. In the circumstances this is not intended.

Recommendation

That the submission be accepted, subject to the matter being able to be explicitly drafted.

Submission

(New Zealand Institute of Chartered Accountants)

The tenor of the amendments should be extended into subpart DO generally, to even better replicate the depreciation rules.

Comment

Officials understand the direction of this submission. However, it potentially has wider implications and in the context of this bill officials have not had time to fully analyse it.

Recommendation

That the submission be declined, but when the Government’s tax policy work programme allows, it should be further considered.