Section EZ 23 — Income Tax Act 2007: Economic rate for plant or equipment acquired before 1 April 2005 and buildings acquired before 19 May 2005

EZ 23 Economic rate for plant or equipment acquired before 1 April 2005 and buildings acquired before 19 May 2005 What this section is about (1) This section is about setting the economic depreciation rate that applies to items of a kind of depreciable property if— (a) the kind of depreciable property is not fixed life intangible property, or excluded depreciable property, for which an economic rate cannot be set; and (b) the items are— (i) plant or equipment acquired before 1 April 2005: (ii) buildings acquired before 19 May 2005: (iii) buildings acquired on or after 19 May 2005, as relationship property or from a company in the same wholly-owned group of companies, from a person who applied to the item an economic depreciation rate set under this section or a corresponding provision. Rate set by Commissioner (2) The Commissioner sets the rate from time to time by— (a) following the procedure set out in this section; and (b) issuing a determination under section 91AAF of the Tax Administration Act 1994. Procedure for setting economic rate (3) To set the diminishing value rate for a kind of item of depreciable property, the Commissioner— (a) gets a figure by applying the formula in subsection (4) to items of that kind; and (b) rounds the figure up or down to the nearest rate specified in schedule 12 , column 1 (Old banded rates of depreciation); and (c) sets the same rate for some or all of the kinds of items of depreciable property that are similar to one another, if the Commissioner thinks it is appropriate to do so having regard to— (i) the rate calculated for each kind; and (ii) the reduction in compliance costs that is likely to be achieved. Formula (4) The formula is— ( ( ) 1 ) . 1 − residual value estimated useful life cost Definition of items in formula (5) In the formula,— (a) residual value is the greater of— (i) estimated residual market value, which is defined in section EE 67 (Other definitions): (ii) 13.5% of cost: (b) cost is the cost of items of the kind to which the formula is applied: (c) estimated useful life is defined in section EE 63 (Meaning of estimated useful life). Defined in this Act: Commissioner , depreciable property , diminishing value rate , economic rate , estimated residual market value , estimated useful life , excluded depreciable property , fixed life intangible property , Compare: 2004 No 35 s EZ 21B