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Business income tax
Tāke moni whiwhi mō ngā pakihi

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Business income tax

Managing depreciation

As a business it's important to keep accurate records of the assets you buy and sell and any depreciation claimed.

Your records should include;

  • the purchase (and sale where relevant) of your business assets and
  • a GST tax invoice if you're GST-registered.

Your records must be kept for at least seven years.

You should also keep a register of your depreciable assets which shows the:

  • cost price of the asset
  • depreciation claimed each year and
  • adjusted tax value.
Note

Adjusted tax value is the value of your asset at the end of each tax year after the annual depreciation deduction.

Go to our Tool for Business for examples of asset registers.

Selling or disposing of a depreciated asset

If you sell, or otherwise get rid of an asset that you've claimed depreciation on, you will need to show any loss or gain you made on the asset in your income tax return.
This also applies if you've claimed depreciation on an area of your home set aside for business (eg a home office) and then sell your home.

It also applies if you cease business.

Example

Computer purchased for $2,500
Depreciation claimed $1,000
Adjusted tax value $1,500
Computer sold for $1,900
Depreciation recovered $400

The $400 is depreciation recovered. It must be included in your income tax return as income in the tax year the computer was sold.

The depreciation calculator can work out any loss or gain.

Keeping a depreciated business asset for private use

If you stop using a depreciated asset for business, but want to keep it for private use, you'll need to show any loss or gain (using the market value of the asset) at the beginning of the next income tax year.
This also applies if you cease business. You will have to make an adjustment in your income tax return for the year after the business ceased or the asset changed use, even if the loss or gain is not realised until a later income year.

Important

Market value is the amount an asset could reasonably be sold for at that point in time. A professional valuation will give you an accurate assessment and can be worthwhile for high value assets. You can also estimate market value by finding out what similar items, of the same age and condition, sell for in second-hand shops or on websites like Trade Me. Keep records to justify the values you put on your assets.

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