DEPRECIATION RATE

Gisborne Herald, Volume LXXIII, Issue 21946, 14 February 1946, Page 3

DEPRECIATION RATE

TAX DEDUCTION MR. NASH EXPLAINS “SUBSTANTIAL RELIEF” (P.A.) WELLINGTON. Feb. 13. An explanation of the special depreciation allowance provided for in the amendment to the Land and Income Tax Act passed last session was made to-day by the Minister of- Finance, Mr. W. Nash. The Minister said the special depreciation allowance would give a substantial measure of relief to taxpayers in primary or secondary industries who had been claiming for some reduction in taxation to enable them to purchase plant or buildings with which to maintain or expand production. “Assets coming within the scone of the Act acquired on or after April 1, 1945, and before April 1, 1948, may. be written down at the special rate which, over a five-year period, aggregates 30 per cent of their cost price. "Special arrangements may be made with the Commissioner of Taxes to spread total depreciation in cases where the taxpayer’s balance date is other than March 31. or where assets are acquired during the taxpayer's accounting year. It should be noted, particularly, that in any case of assets acquired prior to April 1, 1945, or subsequent to March 31, 1948, will not rank for the special depreciation allowance.” At Commissioner’s Discretion Mr. Nash said the special rate of depreciation would be allowed at the commissioner's discretion in addition to the normal specified rate of depreciation operative over past years. The new allowance would always be calculated on the cost price and, in general, would be allocated as follows: First year, 10 per cent; second ye_ar, eight per cent; third year, six per cent; fourth year, four per cent; fifth year, two per cent. This would give a total of 30 per cent. The Minister quoted examples of how this special rate, plus the normal rate, would operate in writing down the cost of plant which originally cost £IOOO. The amount written off over the initial five years was £567 13s 6d, or 56.7 per cent of the cost, compared with £324 formerly.

He also gave an example of the combined rates on a wooden building, showing a total writing off of £425 over a five-year period. Mr. Nash said the first test of qualification for tlie special rate would be: — “Is the asset one on which ordinary depreciation would be allowed, and was it acquired after March 31, 1945?” If the answer was in the affirmative, the taxpayer should set out the full circumstances in writing before forwarding his returns of income, giving the purchase price, whether new or secondhand, the reason for purchase, the date of purchase, the date when the asset was first used, and any other relevant details. The Minister said farmers could claim for the allowance, and one poin' of interest was that a farmer purchasin' a farm dwelling for his own occupation could claim for the special rate to be allowed on one-quarter of the value of his residence on the farm. Mr. Nash added that applicants would have to support their claims bv accounts, preferably on a double-entry basis.