DEPRECIATION ALLOWANCE

Otago Daily Times, Issue 26077, 14 February 1946, Page 4

DEPRECIATION ALLOWANCE

INCOME TAX ACT AMENDMENT EXPLANATION BY MINISTER (P A ) WELLINGTON, Feb. 12. An explanation of the special depreciation allowance provided for in the amendment to the Land and Income Tax Amendment Act passed last session was made to-day by the Minister of Finance, Mr W. Nash, who said the special depreciation allowance would give a substantial measure of relief to taxpayers in the primary or secondary industries who had been claiming some reduction in taxation to enable them to purchase plant or buildings with which to maintain or expand production. . , . t “Assets coming within the scope of the Act acquired on or after April 1, 1945, and before April 1, 1948, may be written down at a special rate which over a five-year period, aggregates 30 per cent, of the cost price. Special arrangements may be made with the Commissioner of Taxes to spread the total depreciation in cases where the taxpayer’s balance date is other than March 31, or where the assets are acquired prior to April 1, 1945, or subsequent to March 31, 1948, will not rank for the special depreciation allowance, ’ Mr Nash said. “The special rate of depreciation will be allowed at -the commissioner’s discretion, in addition to the normal specified rate of depreciation operative over the past years. The new allowance will always be calculated on the cost price, and in general will be allocated as follows: — First year, 10 per cent.; second year, 8 per cent.; third year, 6 per cent.; fourth year, 4 per cent.; fifth year, 2 per cent.—giving a total of 30 per cent.” , , , Mr Nash quoted examples of how this special rate, plus the normal rate, would operate in writing down the cost of plant which originally cost thousands of pounds. 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 fiveyear period. Mr Nash said the first test of qualification for the 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 return of income giving the purchase price, whether new or second-hand, the reason for purchase, the date of purchase, the date when the asset was first used, and any other relevant details. Mr Nash said farmers could claim for the allowance, and one point of interest was that a farmer purchasing 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 by accounts, preferably on the double-entry basis.