Building depreciation rate FY10/11

[Danos]

I thought i understood this as it should be quite straight forward but my accountant has a different understanding/interpretation than me so i would appreciate feedback on this one.

I sold my rental to an LAQC in Sep 2004. I do my own accounts and send them to an accountant for review and to file returns for me. I have always used 4% DV for the house depreciation in the depreciation schedule. My accountant has used 3% DV for the last three FY's. He states that he is 100% certain that 3% DV should be used because of a law change around 2006, despite the property being acquired by the LAQC (now LTC) in Sep 2004.

All reference material i can find on the IRD website including the rate finder and IR260 and 267 indicate that 4% DV can be used. Is my interpretation correct that for FY 10/11 i can use 4% DV depreciation on the building?

Thanks for any advice on this one.

[gavinc]

FYI - Just looked at my accounts and my accountant is using 3% DV for two buildings - one purchased before and one purchased after 2006

[Danos]

Hey Gavinc, Was your pre-2006 purchase pre- 19 May 2005 as that is the change over date for the different DV rates?

[gavinc]

Hi Danos
I brought April 2003 -

[Rosco]

bring on the easy questions, like this one. I like these!

4% DV up to 18/5/05, or 3% SL.

19/5/05 to 31/3/11, 3% DV or 2% SL

From 1/4/11 onwards unfortunately it's now 0% in just about all cases.

Ross

[Danos]

Hi Ross,
It seems my accountant is right then. I still don't understand why IRD promulgates historical depreciation rates for buildings and assets purchased prior to FY 05/06. It would seem that with the application of these new rates it is irrelevant when the asset was purchased. There must be something i'm missing here, are the historical rates for historical tax returns ie if i was to submit a tax return for an IP for the FY 03/04 for example?
Thanks for your clarification.
Danny

[Rosco]

Sorry my answer obviously wasn't clear.

If started at the 4% DV, then continue at 4% up to 31/3/11.

As a general rule, you never change depreciation or depreciation rates. It continues as previously claimed (except for building depreciation ceasing).

So if you purchased a building 1/4/2003 and wanted to use DV. You would depreciate at 4% all the way up to 31/3/11.

If you purchased in April 2006 and wanted to use DV. You would depreciate at 3% up to 31/3/11.

Ross

[Danos]

Thanks for that Ross. That is how i had interpreted it as well.
Cheers.