Removal of the remnants of depreciation loading

Clauses 22, 60

As part of Budget 2010 the general 20% depreciation loading was removed. However, for subpart DO, which deals with primary sector amortisable assets, this was not removed as a result of oversight. The bill proposes to correct this with, in general, application from 13 September 2012, the date of the announcement.

Submission

(New Zealand Institute of Chartered Accountants)

The measure should apply from the commencement of taxpayers’ 2013–14 income year.

Comment

The concern is that if given advance notice, taxpayers might accelerate their expenditure in order to gain larger deductions. NZICA submits that this concern is overstated and that it would be cleaner from a compliance perspective to make this amendment on an “income year” basis.

There is a risk that late balance-date farmers (and for sheep and beef farmers, typically balance at 30 June) will have a window between when this bill is reported back to the House (and therefore this amendment would become public) and their balance date to accelerate some development expenditure to attract the loading. Officials judge this risk as being immaterial and accept the compliance point.

We note that because of the particular way this measure has been forecast, there are no fiscal implications.

Recommendation

That the submission be accepted.