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You must claim depreciation on assets kept in your business for longer than a year. These are capital expenses or capital (fixed) assets.

Low value assets

You can claim an immediate tax deduction for low value assets, instead of claiming depreciation over the asset's life.

Income year Low value assets
Up to 16 March 2020 Assets costing less than $500
17 March 2020 to 16 March 2021 Threshold increases temporarily to $5,000
17 March 2021 onwards Threshold reset to $1,000

Pooling assets

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.

Depreciation rates

Assets are depreciated at different rates. We set depreciation rates based on the cost and useful life of assets.

Depreciation methods

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.

Work out diminishing value depreciation

The straight line method (SL)

This method depreciates at the same rate each year.

Work out straight line depreciation

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.

Depreciation on buildings

Depreciation was allowed on most buildings until 2011. For the 2012 – 2020 income years, the depreciation rate for buildings with an estimated life of more than 50 years was set at 0%.

Changes reintroduced depreciation deductions for non-residential buildings for the 2021 – 2024 income years.

From the 2025 income year, the depreciation rate for non-residential buildings has returned to 0%.

Interpretation Statement (IS) 22/04 provides guidance to building owners on claiming depreciation on buildings. It considers the meaning of 'building' for depreciation purposes and the distinction between residential and non-residential buildings.

Interpretation Statement (IS) 22/04 - Claiming depreciation on buildings (Tax Technical)

Assets that do not depreciate

Some assets do not depreciate including:

  • land
  • trading stock
  • franchise fees
  • intangible assets, like goodwill.
3 minutes
Depreciation rate finder and calculator

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).

Last updated: 01 Apr 2024
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