There has been welcome clarification of the rules regarding the depreciation of commercial building fit-out this week.  The Revenue Minister released a joint Treasury and IRD discussion paper on Wednesday that said a commercial building includes only structural items such as foundations, framing, walls and the roof, rather than the fit-out.

This has become an area of concern for commercial property owners since it was flagged in the 20 May budget that the ability to depreciate commercial and residential property would be axed.  Since the budget it has been unclear whether fit-outs on commercial buildings would be dealt with in a similar manner to residential property. 

In the case of residential properties, many chattels are considered to be part of the building and therefore not able to be depreciated under the new depreciation rules.

The discussion paper states “The law would be changed to clarify that fit-out associated with commercial, industrial, recreational and certain short-term accommodation (for example motels, hotels, rest homes and hospitals) would be able to be separately depreciated.”

The rationale for treating chattels differently in commercial versus residential properties appears to be that there are fundamental differences between residential and commercial fit-outs, with the value of commercial fit-outs depreciating more quickly justifying a depreciation regime.

This appears reasonable from the point of view of commercial property owners.  After all, fit-outs have a significant cost and often don’t survive longer than an individual lease contract which may be as short as six years or less.  Whereas much of a residential fit-out can last as long as the building itself.

This removal of depreciation on buildings will heighten the importance of the distinction between capital expenditure and repairs and maintenance – an area which can be rather grey.  With repairs and maintenance typically being 100% tax deductible – and capital expenditure potentially not even depreciable, the stakes have become higher with regards this distinction.

Hoax emails have been doing the rounds claiming that the recipient is due a tax refund.  Some of these claim to be from a company calling themselves “NZ Tax Refunds” and others claim to be from the IRD.

These emails contain links to a false internet banking login site.

The most recent hoax email claims to be from IRD advising that after the last annual calculation the recipient is due a refund of $988.50 – and requesting the recipient to click on a “Refund me now” link.  The link goes to a false internet banking login page which asks for your personal login details.

Here’s an example of the hoax email doing the rounds this week:

After the last annual calculations of your fiscal activity, we have determined that you are eligible to receive a tax refund of $988.50.   Please submit the tax refund request and allow us 3-5 days in order to process it.

Click Refund Me Now to submit your tax refund request.

Note:  A refund can be delayed a variety of reasons, for example submitting invalid records or applying after deadline.

Best Regards

Inland Revenue – Te Tari Taake

If you have received one of these emails, just delete it without clicking on any of the links.

And if you suspect you have responded to a fraudulent email, please call your bank immediately to alert them.

To be safe, always type your bank’s web address (for example www.bnz.co.nz) directly into your browser rather than following a link – and remember your bank will never send emails with links to internet banking login pages nor to pages that ask for personal information.