Businesses should be allowed to claim a deduction for depreciation on an asset if the asset actually reduces in value, said Michael Barnett, Auckland Chamber of Commerce chief executive.
A Tax Working Group proposal to remove the 20% depreciation loading on new assets unfairly penalises businesses claiming legitimate deductions, Mr Barnett said.
New technology, work vehicles and office fit-outs were all examples of assets that depreciate over time and the ability to claim a 20% depreciation loading on new assets should be retained, he said.
Whether commercial buildings depreciate is a more vexed issue. While there is an argument that an exemption should be allowed for manufacturing and industrial buildings, where technology and processes are a feature and often become outdated or redundant, Mr Barnett said most commercial buildings continue to appreciate in value.
“This is an issue of fairness,” he adds. “It is entirely reasonable for government to demand that if businesses claim a deduction for depreciation on an asset, then the asset should depreciate.
“Similarly, where an asset demonstrably loses value over time, then businesses should be able to claim a deduction as a legitimate business expense.”
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