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The Budget's building depreciation changes will affect buildings with an estimated useful life of 50 years or more such as rental housing and offices.

The rules will change for all buildings from the 2011/12 income year. For most businesses they will be from April 1 next year.

The Government is aiming to raise $685 million in 2011/12 and $690 million in 2013/14 from this change.

Its data indicated buildings do not drop in value over time. They rise in value. So the old depreciation regime effectively gives a tax break or preference for owning property.

"The new rules will better reflect how buildings actually change in value and make the tax treatment of property fairer compared to other forms of investments. This will encourage productive investment in the economy," the Government said last week.

Landlords, property investors, property investment companies and some business owners will be hit. They can now claim depreciation at 3 per cent (diminishing value method) or 2 per cent (straight line method) of the purchase price of their building.

Building owners will still be able to claim deductions for repairs and maintenance. They will also be able to claim depreciation deductions for fitouts, not considered part of the building.

The Government is to review the treatment of commercial fitouts and, if necessary, change rules in the next few months to get rid of uncertainty.

Building owners will be able to apply to Inland Revenue for a provisional depreciation rate if they consider a class of buildings has an estimated useful life of less than 50 years.

Residential landlords said they were not too concerned at this change but the commercial sector is worried and the Property Council said it objected to the shift.

The council likes the company tax rate dropping from 30 per cent to 28 per cent. But its chief executive Connal Townsend says the biggest negative impact of the Budget is banning depreciation for a building's structure. The council is also worried about the fitout depreciation review.

Building depreciation:

The reduction of a building's value as it ages. Commercial and residential building owners will no longer be able to claim tax deductions for this.