Snippets

Depreciation on buildings

On 20th July 2022 Inland Revenue released a 51-page interpretation statement 22/04 – Claiming depreciation on buildings.

In light of the re-introduction of depreciation on non-residential buildings from the 2021 income year, the interpretation statement is intended to give guidance to building owners on when they can claim depreciation on buildings.

Specifically, the statement emphasises the important of understanding the difference between a residential building – where the depreciation rate remains at 0% – and non-residential buildings.

The basis of the interpretation statement appears logical enough, however, it includes the following surprising statement:

“where a building is used for both residential and non-residential purposes, it will only have a depreciation rate of greater than 0% if it is predominantly or mainly used for non-residential purposes: it is effectively an all-or-nothing test”

This is relevant, for example, where a building that has retail shops on the ground floor and residential apartments on the first floor, or in a rest-home context where there may be independent living apartments within a building that also provides hospital or assisted care.

The statement provides that the “predominant use” of the building must be established to determine whether the applicable depreciation rate for the entire building is more than 0%. This suggests (but not specifically commented on) that the owner of a unit titled residential apartment in a predominantly commercial building, is able to depreciate it at the commercial building rate.

Building owners who own all or part of a mixed-use building should read the interpretation statement carefully to determine their depreciation obligations.

Sick leave balances taking a hit

Whether it’s a cold, flu, a tummy bug from day-care or the notorious C-word, we’re only partway through winter and already the amount of sick leave being taken seems higher than normal.

In New Zealand, most employees are entitled to 10 days of paid sick leave per year – this was only increased recently on 24 July 2021 from 5 days. We also allow unused sick leave to be carried over to the next year, to a maximum of 20 days. But how do we stack up against other countries?

In the US, there are no federal law requirements to provide paid sick leave. Such an entitlement is considered a luxury and not a right, and as a result, any entitlement is provided at a state level. The amount of paid sick leave varies on a state-by-state basis, but most of the states that do have sick leave policies cap the amount at a maximum of 40 hours (~5 days) per year.

However, there are still approximately 18 states that do not require employers to provide their employees with paid sick leave, and further, some of these states also have pre-emption laws to prevent cities and local governments from implementing paid sick leave requirements.

In the UK, the legislated weekly sick leave allowance is only ~20% of the average employee’s income. On the other end of the spectrum, employees in Sweden are entitled to 80% of their salary for up to a year. In Slovenia, the entitlement is unlimited and is also paid at the 80% rate.

Due to the number of lock-down periods over the past two years keeping us sheltered from bugs and bacteria, prior to this winter many of us would have been sitting at the maximum accumulated 20-day amount – it’s no wonder our immune systems and our sick leave balances are taking a hit!