From the 2020-2021 income year onwards IRD is changing depreciation for a commercial and industrial building. Previously, tax depreciation on all buildings was at 0% because of 2011 tax law changes.
Now if your business is eligible, you'll be able to claim depreciation deductions in your tax return for commercial and industrial buildings.
These changes are to help:
you with your business cash flow in the short-term
economic recovery long-term by encouraging you to invest in new and existing buildings.
The applicable depreciation rates introduced are 2% DV and 1.5% SL.
The value of your building used for depreciation purpose has to be the original purchase price. If your purchase agreement did not split the cost between land and building, you might need to obtain a property valuation. Based on this valuation, you can work out the percentage of land and building, then apply the percentage to derive the original cost of the building. Alternatively, you can use government valuation to work out the ratio of the land and building.
Residential buildings are not part of these depreciation changes. It is because they depreciate at a much slower rate.
Disclaimer:
This article is of a general nature only. Please obtain specific advice on client situations as minor changes in facts may result in significantly difference outcomes. This article does not purport to cover all aspect of tax law relevant to the topics covered.
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