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Inland Revenue

Tax Policy

Deductibility of repairs and maintenance on commercial fit-out

(Clause 14)

Summary of proposed amendment

The amendment clarifies when expenditure is deductible as repairs and maintenance when it is incurred on items of commercial fit-out. It removes an unintended policy outcome arising from an earlier decision to allow depreciation for commercial building fit-out.

Application date

The amendment will apply from 1 April 2011.

Key features

New section DA 5 ensures that the replacement or improvement of a previously separately depreciated item of commercial fit-out is capitalised and depreciated over its estimated useful life. Expenditure on repairs and maintenance of an item of commercial fit-out will remain immediately deductible.


The decision to allow building fit-out to be depreciable property introduced a new definition of building which conflicted with an existing, related definition. This was an oversight which produced an unintended policy outcome that may have allowed the replacement of an item of commercial fit-out to be deductible as repairs and maintenance. Without an amendment, this oversight could be exploited to claim immediate deductions for expenditure on commercial fit-out that should be capitalised and depreciated over its estimated useful life.