Residential Rental Property Acquired After the Start of 2012 Tax Year
Grange Associates Ltd - 27 February 2012
Although you cannot claim building depreciation from the beginning of
the 2012 tax year, the common notion that you can no longer claim any depreciation on your rental properties
is not the case. Whilst building depreciation rates have now been set to 0%, depreciation is still
allowed on all chattels.
So, if you have invested in a residential rental property on or after
1 April 2011, but did not obtain a valuation of any chattels included in the purchase at the time, you may
want to do so before you complete your annual accounts for 2012. They can then be scheduled and
depreciated separately from the building itself.
The IRD will apply the following approach to determine whether an item
is part of a residential rental property or whether it should be depreciated separately.
1. Is the item in some way attached or connected to the
building? If the item is completely unattached, it will not form part of the building. If the
only means of attachment is by way of being plugged or wired into an electrical outlet, it is not considered
attached for these purposes. If the item is attached to the building, refer to step
2. Is the item an integral part of the of the residential rental
building? Would the building be considered incomplete or unable to function without the item? If
it is an integral part, then it will be considered part of the building, and cannot be depreciated
separately. If it is not an integral part of the building, refer to step 3.
3. Is the item built-in, attached or connected to the building in
such a way that it is part of the “fabric” of the building? Take into consideration factors such as the
nature and degree of attachment, how difficult it would be to remove the item, and whether there would be
significant damage to either the item or the building if the item was removed. If the item is part of
the fabric of the building, then it is part of the building for depreciation purposes.
Further to the three-step approach, the IRD has provided guidance by
way of the below examples as well as a new schedule of residential rental property
Not Separately Depreciable - Items Considered Part of the
|Plumbing & piping
Bathroom Fittings & Furniture
Tiles (wall and floor)
Separately Depreciable - IRD Residential Rental
Property Chattels Depreciation Schedule
|Air conditioners and heat pumps
Air ventilation systems
Satellite receiving dishes
Waste disposal units
All information is correct at the date of article
publication. Please note we provide the information as a service only. Accordingly, the contents are
not intended as a substitute for specific professional advice and should not be relied upon for that
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