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Technical tax area Ngā tūmomo whakataunga me ngā aratohu

Provisional Determination PROV26: Depreciation Rate for hydroelectric powerhouses

Note to Determination PROV 26

The Commissioner of Inland Revenue sets a provisional depreciation rate for hydroelectric powerhouses by adding a new asset class to the "Power generation and electrical reticulation" industry category.

A hydroelectric powerhouse is integral to the function of a hydroelectric power scheme's purpose of generating hydroelectricity. 

Hydroelectric powerhouses have diverse outward appearances; however there is a relatively consistent internal design, as follows:

  • In most cases, there is an above-ground component to hydroelectric powerhouses which are covered with a form of exterior weather-proofing.  In other cases, the hydroelectric powerhouses are built entirely below-ground;
  • Hydroelectric powerhouses are generally multi-levelled structures with access galleries in order to gain access to the turbines and generators;
  • Reinforced foundations and walls are required in order to carry the water flows through the structure, contain and withstand the forces arising from the operating the turbines and generators, and carry the gantry cranes which are used to remove the turbines and generators for maintenance and/or replacement.

To the extent that the components situated within powerhouses are separate depreciable property they are to be depreciated in line with the general economic rate provided in the "Power Generation and Electrical Reticulation Systems" industry category.  For example, "Turbines (water)" at a rate of 10% DV, based on an estimated useful life of 20 years.

The provisional depreciation rate for hydroelectric powerhouses does not apply to powerhouses used as part of other forms of electricity generation.


Determination: Tax Depreciation Rates Provisional Determination Number 26

1. Application

This determination applies to taxpayers who own depreciable property of the kind listed in the table below.

This determination applies from the 2012 and subsequent income years.

2. Determination

Pursuant to section 91AAG of the Tax Administration Act 1994, the provisional determination will apply to the kind of items of depreciable property listed in the table below by adding into the "Power generation and electrical reticulation" industry category, a new asset class, estimated useful life (EUL), and diminishing value (DV) and straight line (SL) depreciation rates, as listed below:

Asset class EUL
(years)
DV depn rate
(%)
DV + 20% loading SL depn rate (%) SL + 20% loading
Hydroelectric powerhouses 100 2 2.4 1.5 1.8

3. Interpretation

In this determination, unless the context otherwise requires, words and terms have the same meaning as in the Income Tax Act 2007 and the Tax Administration Act 1994.

This determination is signed by me on the 25th day of March 2015.

 

 

Rob Wells
LTS Manager, Technical Standards