The Building (Earthquake-Prone Buildings) Amendment Act 2016 requires city and district councils to actively identify and require owners to act on earthquake-prone buildings.
Inland Revenue confirmed in late 2016 that in most cases, costs incurred in obtaining a detailed seismic assessment of a building are revenue in nature, and fully deductible. An exception will be where the costs are part of an overall capital project (a seismic strengthening project) where such costs must be capitalised. Nor will a deduction be available for costs of a seismic strengthening assessment when purchasing a building.
This represents a change in Inland Revenue’s view following the issue of a 2016 IR exposure draft. Congratulations must go to those tax accountants who made submissions challenging IR’s initial approach (and to IR for taking the submissions on board). Advisors might want to relook at any clients’ filed income tax returns where such costs were not claimed as a deduction. (Refer to QB 16/08 issued on 22 February 2017 for full details).
