Motor vehicles rented for short-term periods of 1 month or less Depreciation Determination Number 77
Determination DEP77 (Mar 2011) amends the provisional depreciation rate for motor vehicles rented for short-term periods of 1 month or less.
Note to determination DEP77
In Tax Information Bulletin Vol 10, No 6 (June 1998) we published a general depreciation determination, "Determination DEP34: Tax Depreciation Rates General Determination Number 34" for certain classes of motor vehicles and trailers when they are rented for short-term hire periods of 1 month or less.
The determination added those asset classes to both the "Transportation" and "Hire Equipment (Where on short-term hire of 1 month or less only)" asset categories. We have been advised that some taxpayers, referring only to the "Transportation" asset category, have been using the depreciation rates set for "short-term" hire even though the assets in question may have been hired for periods longer than 1 month (in this context, 1 month refers to a calendar month).
We have therefore issued a new depreciation determination deleting the old asset classes set out in DEP 34 from the "Transportation" asset category, and inserting new asset classes making it clear that the higher depreciation rates that may be used for motor vehicles and trailers used for short-term hire apply only to those assets that are hired only for periods of one month or less. The depreciation rates, however, are unchanged.
We have also been asked to clarify whether or not the asset category could be used for assets that are used for both short-term (1 month or less) and longer term hire (periods of longer than 1 month). This issue arises where taxpayers generally hire the motor vehicles / trailers for short-term (1 month or less) periods, but may occasionally hire them for a longer term.
It is the Commissioner's view that the higher depreciation rates available for assets that are used for short-term hire periods should only be used for assets that are exclusively hired for short-term periods. Taxpayers who hire assets for both short and longer terms should not use the depreciation rates that apply for short-term periods.
General Depreciation Determination DEP77
This determination may be cited as "Determination DEP77: Tax Depreciation Rates General Determination Number 77".
1. Application
This determination applies to taxpayers who own items of depreciable property of the kinds listed in the table below.
This determination applies for the 2010/11 and subsequent income years.
2. Determination
Pursuant to section 91AAF of the Tax Administration Act 1994 I set in this determination the economic rate/s to apply to the kind/s of items of depreciable property listed in the table below by:
- Deleting from the "Transportation" asset category the general asset classes, estimated useful lives and diminishing value and straight-line depreciation rates listed below:
| Transportation | Estimated useful life (years) | DV rate (%) | SL rate (%) |
|---|---|---|---|
| Motor vehicles – Class NA (for transporting light goods that have a gross vehicle mass not exceeding 3.5 tonnes and used for short-term hire). | 6.66 | 30 | 21 |
| Motor vehicles – Class NB (for transporting medium goods that have a gross vehicle mass exceeding 3.5 tonnes but not exceeding 12 tonnes and used for short-term hire). | 8 | 25 | 17.5 |
| Motor vehicles – class NC (for transporting heavy goods that have a gross vehicle mass exceeding 12 tonnes and used for short-term hire). | 6.66 | 30 | 21 |
| Trailers – Class TA and TB (for transporting very light and light goods that have a gross vehicle mass not exceeding 3.5 tonnes and used for short-term hire) excluding domestic trailers. | 10 | 20 | 13.5 |
| Trailers – Class TC (for transporting medium goods that have a gross vehicle mass exceeding 3.5 tonnes but not exceeding 10 tonnes and used for short-term hire). | 12.5 | 16 | 10.5 |
| Trailers – Class TD (for transporting heavy goods that have a gross vehicle mass exceeding 10 tonnes and used for short-term hire). | 10 | 20 | 13.5 |
| Trailers – domestic. Not exceeding 1 tonne. Used for short-term hire | 6.66 | 30 | 21 |
| Motor vehicles (for transporting people, up to and including 12 seats and used for short-term hire). | 4 | 50 | 40 |
| Forklift trucks (8 tonnes and over used for short-term hire) | 8 | 25 | 17.5 |
| Forklift trucks (under 8 tonnes used for short-term hire). | 6.66 | 30 | 21 |
- Adding into the category "Transportation" asset category the general asset classes, estimated useful lives, and diminishing value and straight-line depreciation rates listed below:
| Transportation | Estimated useful life (years) | DV rate (%) | SL rate (%) |
|---|---|---|---|
| Motor vehicles – Class NA (for transporting light goods which have a gross vehicle mass not exceeding 3.5 tonnes and are used for short-term hire of 1 month or less only). | 6.66 | 30 | 21 |
| Motor vehicles – Class NB (for transporting medium goods which have a gross vehicle mass exceeding 3.5 tonnes but not exceeding 12 tonnes and used for short-term hire of 1 month or less only). | 8 | 25 | 17.5 |
| Motor vehicles – class NC (for transporting heavy goods which have a gross vehicle mass exceeding 12 tonnes and used for short-term hire of 1 month or less only). | 6.66 | 30 | 21 |
| Trailers – Class TA and TB (for transporting very light and light goods which have a gross vehicle mass not exceeding 3.5 tonnes and used for short-term hire of 1 month or less only) excluding domestic trailers. | 10 | 20 | 13.5 |
| Trailers – Class TC (for transporting medium goods which have a gross vehicle mass exceeding 3.5 tonnes but not exceeding 10 tonnes and used for short-term hire of 1 month or less only). | 12.5 | 16 | 10.5 |
| Trailers – Class TD (for transporting heavy goods which have a gross vehicle mass exceeding 10 tonnes and used for short-term hire of 1 month or less only). | 10 | 20 | 13.5 |
| Trailers – domestic. Not exceeding 1 tonne. Used for short-term hire of 1 month or less only. | 6.66 | 30 | 21 |
| Motor vehicles (for transporting people, up to and including 12 seats and used for short-term hire of 1 month or less only). | 4 | 50 | 40 |
| Forklift trucks (8 tonnes and over used for short-term hire of 1 month or less only). | 8 | 25 | 17.5 |
| Forklift trucks (under 8 tonnes used for short-term hire of 1 month or less only). | 6.66 | 30 | 21 |
3. Interpretation
In this determination, unless the context otherwise requires, words and terms have the same meaning as in the Income Tax Act 2007 and the Tax Administration Act 1994.
This determination is signed on the 24th day of March 2011
Rob Wells
Manager
LTS Technical Standards