28 Sep 2015

Depreciation Rate for specialised oil and gas industry equipment

Determination DEP96 (2015) sets a depreciation rate for specialised oil and gas industry equipment used to evaluate and repair existing wellbores.

Note to Determination

The Commissioner has set general depreciation rates for several items of specialised equipment used by oil and gas industry support specialists to evaluate, repair or stimulate the performance of existing wellbores, not currently provided for under the "Oil and Gas Industry" category, within the Commissioner’s Table of Depreciation Rates.

The asset class for "Tools, downhole" includes shifting tools, fishing tools, tungsten stembars, pulling tools, gauge rings, broaches and centering tools.  The asset class does not include perforating guns which are made by several shaped explosives charges within the gun.  As most retrievable perforating guns can be used once only as they distort when fired and are weakened, the Commissioner considers these items are consumable items and be treated as revenue expenditure items.

Mobile steel tanks, usually constructed of welded mild steel to store or distribute water and other liquids, are viewed by the Commissioner to generally have an estimated useful life of 20 years.  However, a new asset class of "Mobile storage tanks (mild steel, welded)" has been added to the "Oil and gas industry" category with an estimated useful life of 15.5 years due to harsh environmental conditions.  In addition, some tanks are used to hold and distribute corrosive acid or alkali and under those circumstances are viewed to have a shorter life of 10 years, as provided for in this determination.

Determination DEP96: Tax Depreciation Rates General Determination Number 96

1. Application

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

This determination applies from the 2014 and subsequent income years.

2. Determination

Pursuant to section 91AAG of the Tax Administration Act 1994 the general determination will apply to the kind of items of depreciable property listed in the table below by:

  • Adding into the "Oil and gas industry" category, new asset classes, estimated useful lives, and diminishing value and straight line depreciation rates as listed below:
Asset class Estimated useful life
DV rate
SL rate
Tools, downhole
(perforating guns excluded; to be treated as consumables, and revenue expense items)
5 40 30
Treating irons 10 20 13.5
Coiled tubing units 12.5 16 10.5
Wireline units 12.5 16 10.5
Slickline units 12.5 16 10.5
Mobile steel tanks (mild steel, welded)
- If affected by acid or alkali
Stuffing boxes and lubricator/riser pipes 10 20 13.5
Slickline floor sheaves 10 20 13.5
Spools 10 20 13.5
Pumping units 10 20 13.5
Nitrogen pumping units 10 20 13.5
Nitrogen generating units 10 20 13.5

3. Interpretation

In this draft 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 Rob Wells on the 28th day of September 2015.

Rob Wells
LTS Manager, Technical Standards