Effect of repeal of Income Tax Act 1994 on depreciation determinations issued before repeal

Question

We have been asked to consider whether depreciation determinations made under sections EG 4, EG 10 or EG 11 of the Income Tax Act 1994 ("the 1994 Act") continue to apply even if they are not reissued under the Income Tax Act 2004 ("the 2004 Act") and the Tax Administration Act 1994 ("the TAA").

Answer

The Commissioner considers that depreciation determinations issued under the 1994 Act continue to apply following the repeal of that Act, without the need to reissue the determinations, as:

• the effect of section YA 3(2) of the 2004 Act is that depreciation determinations made under the 1994 Act are treated as if they were made under the equivalent provisions in the 2004 Act and the TAA; and
• the effect of section 21 of the Interpretation Act is that depreciation determinations made under the 1994 Act continue in force following the repeal of that Act.

Legislation

 Section YA 3(2) of the 2004 Act provides:

A reference in an enactment or document to the Income Tax Act 1994 (or to the Income Tax Act 1976), or to a provision of that earlier Act, is to be interpreted as a reference to this Act, or to the corresponding provision in this Act, to the extent necessary to reflect sensibly the intent of the enactment or document.

Section 21 of the Interpretation Act 1999 ("the Interpretation Act") provides:

Anything done in the exercise of a power under a repealed enactment, and that is in effect immediately before that repeal, continues to have effect as if it had been exercised under any other enactment-

(a)           That, with or without modification, replaces, or that corresponds to, the enactment repealed; and

(b)           Under which the power could be exercised.

Analysis

The 1994 Act was repealed with respect to tax on income for the 2005/2006 and subsequent tax years when the 2004 Act came into force on 1 April 2005:  section YA 1 of the 2004 Act.  Unless an enactment is preserved by a savings provision at the time of the repeal, the effect of the repeal of an Act is that:

• for the future, the enactment is treated as if it had never existed; and
• subordinate or delegated legislation made under a repealed Act lapses.

See Inspector of Awards and Agreements v Malcolm Forlong Ltd [1974] 1 NZLR 36. 

Therefore, unless depreciation determinations are preserved by a savings provision, determinations made under sections EG 4, EG 10 or EG 11 of the 1994 Act would lapse in respect of the 2005/2006 and subsequent income years following the repeal of the 1994 Act.

The 2004 Act contains a specific savings provision, section YA 3(2).  There is also a general savings provision in the Interpretation Act 1999, section 21.  A specific savings provision will override a savings provision in the Interpretation Act:  Vela Fishing Ltd v CIR (2001) 20 NZTC 17,242 (CA); (2003) 21 NZTC 18,123 (PC)(CA); Nelson Air Ltd v NZ Airline Pilots Assn IUOW [1992] 1 ERNZ 632.  However, there is no inconsistency between section YA 3(2) and section 21.  These provisions complement each other and give rise to the same result. 

Section YA 3(2)

For section YA 3(2) to apply in respect of depreciation determinations made under the 1994 Act, the following conditions must be satisfied:

• A depreciation determination is an enactment or document.
• A provision in the 2004 Act or the TAA is a "corresponding provision" to a provision in the 1994 Act.  References in the 2004 Act to "this Act" include a reference to the TAA "unless the context otherwise requires":  section AA 3(1).  Therefore, a "corresponding provision" may be in the 2004 Act or the TAA.
• It is necessary to interpret references to the 1994 Act and to section EG 4, section EG 10 or section EG 11 in a determination as references to the 2004 Act and to a corresponding provision in that Act "to reflect sensibly the intent of" the depreciation determination.

Section YA 3(2) applies to depreciation determinations as:

• A depreciation determination is a document, being an official record of the Commissioner's determination of the depreciation rates to be applied for the purposes of the Income Tax Act. The essential characteristic of a "document" is that it is a record of information in some form:  see R v Daye [1908] 2 KB 3338; Tucker (JH) & Co Ltd v Board of Trade [1955] 2 All ER 522; and Rollo v HM Advocate (1996) SCCR 874. 
• Section EE 25 of the 2004 Act and section 91AAF of the TAA are corresponding provisions to section EG 4 of the 1994 Act.  Section EE 29 of the 2004 Act and sections 91AAG, 91AAH, 91AAI and 91AAJ of the TAA are corresponding provisions to section EG 10 of the 1994 Act. The corresponding provisions to section EG 11 of the 1994 Act are sections EE 21, EE 22, EE 23 and EE 24 and section 91AAL of the TAA.
  
  It is irrelevant that a provision in the repealed legislation has been replaced by more than one provision.  As section 33 of the Interpretation Act provides that "words in the singular include the plural", the reference to "corresponding provision" in section YA 3(2) includes corresponding provisions:   Seataste Products Ltd v Director-General of Agriculture and Fisheries [1995] 2 NZLR 449.  To be a "corresponding provision", a provision must have a similar purpose, have the same character and function, prescribe the same thing to be done and be designed to produce the same results but need not be identical to the provision in the repealed legislation:  Vela Fishing Ltd v CIR (2001) 20 NZTC 17,242 (CA); (2003) 21 NZTC 18,123 (PC).  It is considered that the provisions relating to the making of depreciation determinations in the 2004 Act and the TAA are corresponding provisions to sections EG 4, EG 10 and EG 11.  As with sections EG 4, EG 10 and EG 11 these provisions authorise the Commissioner to determine depreciation rates and set out the procedure for setting depreciation rates for the purpose of calculating the amount of depreciation on depreciable property. 
• It is necessary to treat a reference to the 1994 Act in an existing depreciation determination as a reference to the 2004 Act or the TAA, and to the corresponding provisions in the 2004 Act or the TAA, in order to reflect sensibly the intent of a depreciation determination.  Generally there is no expiry date in a depreciation determination.   As there are no policy changes in respect of the setting of depreciation rates under the new legislation, it is considered that the intent of existing depreciation determinations is that they will apply indefinitely to the relevant assets until they are revoked or that they will apply until their expiry date. 

Section 21 of the Interpretation Act

The effect of section 21 is that anything done in the exercise of a power under a repealed enactment (such as the making of a depreciation determination under the 1994 Act), that is in effect immediately before the repeal, shall continue to have effect as if the power had been exercised under any enactment (such as the 2004 Act) if:

• that enactment replaces or corresponds with the repealed enactment; and
• the power could be exercised under the new enactment. 

The 2004 Act (which has the same purpose as the 1994 Act) replaces or corresponds to the 1994 Act (see section BA 1 of the 1994 Act and section BA 1 of the 2004 Act).  Under both the 1994 Act and the 2004 Act the Commissioner has the power to make depreciation determinations.  Therefore, the effect of section 21 is that depreciation determinations made under the 1994 Act continue to have effect following the repeal of the 1994 Act. 

Effect of sections YA 3(2) and 21

 The effect of section YA 3(2) is that references in existing depreciation determinations to the 1994 Act would be interpreted as references to the 2004 Act so that a depreciation determination expressed to be made under the 1994 Act is treated as having been made under the 2004 Act.  The effect of section 21 is that a depreciation determination made under the 1994 Act continues to have effect as though it was made under the 2004 Act (and the TAA).  These provisions operate in a different but complementary manner.  The effect of both section YA 3(2) and section 21 is that depreciation determinations made under the 1994 legislation continue to have effect following the repeal of the 1994 Act.