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Inland Revenue

Tax Policy

PUBLISHED 6 April 2006

Depreciation rates for trucks, vans

The government will introduce legislation to clarify the tax depreciation rates applying to trucks and vans. The changes will remove potential ambiguity in recently enacted legislation that may create uncertainty about how the new rates are to be applied. For more information see the media statement from the Minister of Revenue.

Hon Peter Dunne
Minister of Revenue


Tax depreciation rates for trucks and vans to be clarified

The government will introduce legislation to clarify the tax depreciation rates applying to trucks and vans, Revenue Minister Peter Dunne announced today.

"Recent changes to the tax depreciation rules allow motor vehicles such as cars, taxis and minibuses used to transport 12 or fewer people to have a 30% diminishing value depreciation rate before depreciation loading," Mr Dunne said.

"As it is worded, however, the new legislation may also allow trucks and vans to fit into that category of motor vehicle and therefore to qualify for the 30% rate, when the intention of the legislation is that rates of no more than 20% before depreciation loading should apply to these assets.

"The potential ambiguity has caused some uncertainty amongst tax practitioners, so it is desirable to clarify the law as soon as possible."

"Therefore changes clarifying the types of motor vehicles that section EE 25D of the Income Tax Act 2004 applies to will be included in the taxation bill scheduled for introduction in May. Once enacted, the changes will apply from the 2005-06 income year," Mr Dunne said.

Contact: Ainslie Fenwick, Tax Advisor, Tel: 04 471 9728

Technical note:

The proposed amendment replaces the words in section EE 25D(3), "having seats for no more than 12 persons". The amended section would read:

(3) The economic rate for a motor vehicle that is designed exclusively or mainly to carry people, and has seats for no more than 12 people, is a diminishing value rate of 30% or a straight-line rate of 21% if the motor vehicle–

(a) is not available for hire:
(b) is available for hire for a period of more than 1 month;
(c) is a taxi:
(d) is a minibus.

Two other amendments to the recently enacted depreciation rules will also be introduced. These amendments are minor and technical in nature.