Depreciable costs of certain depreciable intangible assets

Clauses 105, 106, 109 and 110

Issue:   Support for the proposals

Submission

(KPMG)

We support the proposed amendments to include capitalised development expenditure relating to patents, patent applications and plant variety rights as part of the depreciable costs of these assets.

Comment

Officials note the submitter’s support for the proposed amendments.

Recommendation

That the submission be noted.

Issue:   Guidance on the meaning of specific words used

Submission

(PwC)

Proposed new section EE 18B of the Income Tax Act 2007 will enable taxpayers who have created an intangible asset that is depreciable for tax purposes to include capitalised expenditure that relates to the asset as part of the depreciable costs of the asset.

It would be helpful if officials provided some guidance on the meaning of “gives rise to, supports, or is an item in which the person holds, the amortising item” in proposed new section EE 18B(a).  It would also be helpful if the guidance included some examples using some of the types of intangible property listed in schedule 14 of the Income Tax Act 2007.

Comment

These words describe the requisite relationship between an underlying item of (non-depreciable) intangible property and an item of depreciable intangible property for amounts of expenditure incurred by a taxpayer for the underlying item to be included in the depreciable cost base of the item of depreciable intangible property.  Officials intend to provide some guidance on what is meant by these words, including examples, in a Tax Information Bulletin to be published following enactment.

Recommendation

That the submission be noted.