Section EE 37 — Income Tax Act 2007: Improvements

EE 37 Improvements When this section applies (1) This section applies when a person makes an improvement to an item of depreciable property. Income year in which improvement made (2) In the income year in which the person makes the improvement, the provisions of this subpart apply to the improvement, as if it were a separate item of depreciable property, in the period that— (a) starts at the start of the month in which the person first uses the improvement or has it available for use; and (b) ends at the end of the income year. Following income years (3) For income years following the income year in which the person makes the improvement,— (a) a person who uses the diminishing value method or the straight-line method for the item that was improved may choose to apply subsection (4) or (5), if paragraph (ab) does not apply: (ab) a person who uses the diminishing value method or the straight-line method for the item that was improved must use subsection (3B) if–– (i) treating the improvement as an item, section EE 31(2A) does not apply, but section EE 31(3A) does apply; and (ii) the item that was improved is a grandparented structure, or is not a building, is not a used import car, is not an international aircraft, or has not been used or held for use in New Zealand as an item of depreciable property before the date on which the person acquires it: (b) a person who uses the pool method for the item that was improved must apply subsections (6) and (7). Improvement compulsorily treated as separate item (3B) For the purposes of subsection (3)(ab), a person must treat the improvement as a separate item of depreciable property. Improvement treated as separate item (4) For the purposes of subsection (3)(a), a person may choose to treat the improvement as a separate item of depreciable property. Improvement treated as part of item (5) For the purposes of subsection (3)(a), a person may choose to treat the improvement as part of the item of depreciable property that was improved. They must do 1 of the following for the first income year, after the income year in which they made the improvement, in which they use the improvement or have it available for use: (a) if they use the diminishing value method for the item, add the improvement’s adjusted tax value at the start of the income year to the item’s adjusted tax value at the start of the income year: (b) if they use the straight-line method for the item,— (i) add the improvement’s adjusted tax value at the start of the income year to the item’s adjusted tax value at the start of the income year; and (ii) add the improvement’s cost to the item’s cost. Pool method (6) For the purposes of subsection (3)(b), a person who uses the pool method for the item that was improved must treat the improvement as a separate item of depreciable property. If its cost is equal to or less than its maximum pooling value, they must include it in a pool in the first income year, after the income year in which they made the improvement, in which they use the improvement or have it available for use. Adjustment of pool’s value (7) When an improvement is included in a pool under subsection (6),— (a) the pool’s adjusted tax value is increased by the improvement’s adjusted tax value on the date it is included in the pool; and (b) the improvement’s adjusted tax value at the end of the previous income year is included in starting adjusted tax value in section EE 21(5) . Defined in this Act: adjusted tax value , building , depreciable property , diminishing value method , grandparented structure , improvement , income year , international aircraft , maximum pooling value , New Zealand , pool , pool method , straight-line method Compare: 2004 No 35 s EE 30 Section EE 37(3)(a): substituted (with effect on 20 May 2010), on 28 May 2010, by section 79(2) of the Taxation (Budget Measures) Act 2010 (2010 No 27). Section EE 37(3)(ab): substituted (with effect on 20 May 2010), on 28 May 2010, by section 79(2) of the Taxation (Budget Measures) Act 2010 (2010 No 27). Section EE 37(3)(ab)(i): substituted (with effect on 20 May 2010), on 21 December 2010, by section 50 of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130). Section EE 37(3B) heading: inserted (with effect on 30 July 2009), on 28 May 2010, by section 79(3) of the Taxation (Budget Measures) Act 2010 (2010 No 27). Section EE 37(3B): inserted (with effect on 30 July 2009), on 28 May 2010, by section 79(3) of the Taxation (Budget Measures) Act 2010 (2010 No 27). Section EE 37 list of defined terms building : inserted (with effect on 30 July 2009), on 28 May 2010, by section 84 of the Taxation (Budget Measures) Act 2010 (2010 No 27). Section EE 37 list of defined terms grandparented structure : inserted (with effect on 30 July 2009), on 28 May 2010, by section 79(4) of the Taxation (Budget Measures) Act 2010 (2010 No 27). Section EE 37 list of defined terms international aircraft : inserted (with effect on 30 July 2009), on 28 May 2010, by section 79(4) of the Taxation (Budget Measures) Act 2010 (2010 No 27). Section EE 37 list of defined terms New Zealand : inserted (with effect on 30 July 2009), on 28 May 2010, by section 79(4) of the Taxation (Budget Measures) Act 2010 (2010 No 27).