In March 2024 the Government issued the Taxation (Annual rates for 2023–24, Multinational Tax, and Remedial Matters) Bill. This Bill encompassed a range of changes to tax legislation including the removal of the tax deduction for depreciation on non-residential buildings.
Our latest publication Accounting for deferred tax – removal of tax depreciation deduction for commercial buildings sets out the possible accounting impacts of the Bill.
Are all buildings impacted by the change?
No, not all buildings qualified for a deduction. The removal of the tax deduction will only affect entities that own commercial and industrial buildings.
How will deferred tax be impacted?
The impact on deferred tax will depend on when the building was acquired and whether tax deductions for depreciation were permitted at that time, whether the initial recognition exemption (IRE) applied at that time, and to what extent the IRE remains available.
Why does this matter?
The impact on deferred tax will be recognised for all reporting periods ended after 26 March 2024, the date the change is regarded as substantively enacted. For entities with reporting date before 26 March 2024, and for which the financial statements have not been issued, a disclosure of any significant effect of those changes on its current and deferred tax assets and liabilities in accordance with NZ IAS 10 Events after the Reporting Period is required.
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We welcome the opportunity to provide any assistance you require to ensure that you are compliant with the latest policy updates and financial reporting standards. Please do not hesitate to get in touch with your local tax provider and any of our specialist team.
