Depreciation is a non-cash expense which recognises the reduction in the value of an asset over time, mainly due to wear and tear.

Generally you must claim depreciation on any fixed assets used in your business that have a useful life of more than 12 months. However, in special circumstances you can elect to the IRD not to depreciate an asset.

Some assets, such as land, are not able to be depreciated. Also, in recent years there have been many changes in relation to the depreciation rules around buildings. From the 2012 financial year, depreciation on most building structures (specifically those with a useful life of 50 years or more) can not be claimed. However, depreciation can still be claimed on a wide range of commercial and industrial building fit-out.

A fixed asset schedule must be maintained to record:

  • A list of all assets that are being depreciated
  • Original cost of each asset
  • Depreciation rate and method being used
  • Depreciation claimed (both in current year and since date of purchase)
  • The adjusted tax value of the asset (calculated as original cost less depreciation claimed since purchase).

To view the depreciation rates and the methods for calculating depreciation, please refer to the  IRD Depreciation Guide (IR260)

Assets that cost less than $500 (excluding GST) are deductible in the year they are purchased (i.e. they do not need to be depreciated). This is provided that:

  • They are not purchased from the same supplier at the same time as other similar assets (same depreciation rate would apply)
  • The asset does not become part of an asset that is depreciable i.e. a part of a larger asset For more information please contact us.