- How to value your assets
If you buy an asset, the value of the asset will be the purchase price (excluding GST if you are GST registered).
If the asset is second-hand, you need to get an opening value by either:
- getting an average price from the newspaper or an online trading site,
- obtaining a receipt from the seller, or
- recording details such as date, name and address of seller and how much you paid.
If you introduce a personal asset into your business you'll need to get a written, current market valuation like an LMVD valuation for your car.
It's important that you keep a record of your assets. Some people call this an asset register, others list the assets and call it a depreciation schedule.
Check out this example of fixed asset records.
- Depreciating your assets
Because fixed assets last longer than a year, you can't claim their cost as a business expense all at once. However, as they wear out, you may be able to claim a percentage of their cost each year as a tax deduction.
For example, a computer has a shorter useful life than a car, so you can claim back the cost of a computer over a shorter period.
You can elect not to depreciate an asset. If you don't want to claim depreciation on an asset, let us know in writing:
- a description of the asset
- the purchase date
- the income year the election is being made for, and
- whether the asset has been newly purchased or its use has changed.
The election for this asset will apply for each year after the asset was purchased.
- Depreciation methods
Our examples will show how depreciation will be calculated over the next 5 years, but you can calculate depreciation on an asset using our calculators for up to 99 years.
You can depreciate your assets using the diminishing value method or straight line depreciation.
Diminishing value method
The amount of depreciation is worked out on the adjusted tax value of the asset. This value is the original cost less any depreciation already claimed in previous years. If you're registered for GST the original cost price should not include GST you have already claimed in your GST return.
Straight line depreciation
Depreciation is calculated on the original cost price of the asset and the same amount is claimed each year. If you're registered for GST, the cost excludes any GST you have already claimed in your GST return.
Use these two tools to help you depreciate your assets:
Disposing of your assets
If your business assets eventually wear out, break or become out dated you may dispose of them by:
- selling the asset - if so, remember to keep full records of the date and sale amount
- discarding the asset - for example, recycling or donating it to a charity
- retaining the asset - for example, keeping a business vehicle for private use.
If you sell your asset for more or less than its 'book value', you'll need to make an adjustment in your income tax return to account for the gain or loss.