Income tax Dates
This adjustment applies to if you have sold a building you claimed depreciation on in the income years before 2004.
If you sold a building you had claimed depreciation on or before 2004
You may need to adjust your income for Working for Families or student loan if you sell a building that was used for a business or rental, and have included the depreciation recovered in your taxable income.
For 2003 and earlier years, you were:
- not allowed to claim depreciation on buildings as a deduction in your income for Working for Families
- not required to include any depreciation recovered on the sale of a building as Working for Families income.
If you recovered any depreciation from the sale of a building that you claimed depreciation on in 2003 and earlier years, then leave this out of your income for calculating your Working for Families entitlements or your student loan repayment obligation.
If your business was running at a loss before 2004
You will need to make an adjustment unless the business income was in a loss (for example, not included in the income for Working for Families) in the year the depreciation was claimed.
If you claimed depreciation on a building between 2004 and 2011
Depreciation on buildings was allowed as a deduction from income for Working for Families purposes from 2004 to 2011. This means you include the recovery of the depreciation claimed as income.
In the examples we have only shown 2 years to demonstrate the overall affect.
Income in 2003
- business income $27,300
- less depreciation claimed on a building $2,300
- business income on IR3 (after $2,300 deduction for depreciation) $25,000
Income in 2004
- business income $25,000
- less depreciation claimed on a building $2,100
- business income on IR3 (after $2,100 deduction for depreciation) $25,000
Income in 2015 - when adjustments for depreciation were made in 2003 and earlier years
| Year | Depreciation
claimed |
Adjustment
made in year |
|---|---|---|
| 2003 | $2,300 | $2,300 |
| 2004 | $2,100 | $0 |
| business income from IR3 return (includes $4,400 depreciation recovered when building sold) | $29,400 | |
| less depreciation recovery (claimed in 2003). The $2,100 claimed in 2004 is not deducted here, because it was not added back in 2004. | $2,300 | |
| Income for Working for Families | $27,100 |
Ben has a commercial rental property that he decides to sell. His taxable income for the 2015 year is $250,000. The total depreciation recovered from the sale is $100,000.
Ben claimed depreciation of $60,000 in the 2003 and earlier tax years and $40,000 in the 2004 to 2011 tax years.
He should reduce his income for Working for Families for the year ending 31 March 2015 by $60,000.