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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.
Adjusted tax value is the value of your asset at the end of each tax year after the annual depreciation deduction.
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.
|Computer purchased for||$2,500|
|Adjusted tax value||$1,500|
|Computer sold for||$1,900|
The $400 is depreciation recovered. It must be included in your income tax return as income in the tax year the computer was sold.
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.
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.
- Choose a depreciation method
- Find the depreciation rate for an asset
- Calculate the depreciation deduction for a business asset