What assets you can claim
You must claim depreciation on assets kept in your business for longer than a year. These are capital expenses or capital (fixed) assets.
Some assets do not depreciate, including:
- trading stock
- franchise fees
- intangible assets, like goodwill.
|Income year||Low value assets|
|Up to 16 March 2020||Customers could claim an immediate tax deduction for assets costing less than $500,
instead of claiming depreciation over the following years.
|17 March 2020 to 16 March 2021||Threshold increases temporarily to $5,000|
|17 March 2021 onwards||Threshold reset to $1,000|
You can group low value assets together and depreciate as a pool. Once you include assets in a pool, you cannot take them out. Pooled assets:
- depreciate using the diminishing value method
- must use the lowest depreciation rate from assets in the pool
- cannot be buildings.
GST and depreciation
If you're registered for GST, you claim depreciation on the price of the asset less the GST charged.
If you are not registered for GST, you claim depreciation on the total price of the asset, including GST.
Assets are depreciated at different rates. We set depreciation rates based on the cost and useful life of assets.
Depreciation on buildings
Depreciation was allowed on most buildings until 2010 and for the 2012 – 2020 income years the depreciation rate for buildings with an estimated life of more than 50 years was set at zero.
Changes in 2020 reintroduce depreciation deductions for non-residential buildings for the 2021 and subsequent income years.
Interpretation Statement (IS) 22/04 provides guidance to building owners on when they can claim depreciation on buildings. It considers the meaning of 'building' for depreciation purposes and the distinction between residential and non-residential buildings.
There are 2 methods for depreciation. The total depreciation you can claim over an asset’s life is the same for both methods.
The diminishing value method (DV)
This method depreciates at a high rate for the start of an asset's life and has a reducing rate each year.
The straight line method (SL)
This method depreciates at the same rate each year.
You do not have to use the same method for all your assets. You can change methods at the end of each year. If you change methods, use the adjusted tax value to work out new depreciation.
Use this tool to find the depreciation rate and calculate depreciation for a business asset.Go to this tool
Use the IR260A to apply for a provisional depreciation rate and the IR260B to apply for a special depreciation rate. The rates to calculate depreciation for assets acquired since 1996 are available in our booklet General depreciation rates (IR265).