INCOME TAX

Evening Post, Volume CX, Issue 45, 21 August 1930, Page 12

INCOME TAX

TrTE DEPRECIATION QUESTION

I Income tax and depreciation allowances were fully discussed by the Associated Chambers of Commerce Conference, held in.-Auckland: last October, and certain suggestions were made'- to the Government. In reply thereto, the Prime Minister has informed the secretary of. the associated chambers (Mr. ¥. 11. Bass) that in respect to the allowance for depreciation it has been found necessary t.o calculate the rates for depreciation upon-.a, conservative basis, the balance of depreciation not allowed for during use being allowed on' the asset being discarded. In practice this method has worked satisfactorily. Regarding the suggestion that a change should be made by calculating depreciation upon original cost in all cases, a change-over in this direction would lead to confusion and would appear to be impracticable. In recent years depreciation of assets appearing in accounts on which depreciation has not previously been fixed has been based upon the original value, and this practice will be followed in future. AVith respect to goodwill of leases, an allowance is made for any amount paid to a landlord on granting of a lease. No allowance can be made, however, for money spent on improvements effected •by a lessee as this is a capital expenditure. To allow capital expenses would be a departure from the principles upon which income tax is based and ?,ny allowance iv this case would serve to establish "a bad precedent." Many other allowances would then be demanded, the claims for which would be equally deserving of consideration.