Assets lose value over time as they get older. This loss of value is depreciation. Businesses claim depreciation loss as a deduction expense each tax year.
You can claim a deduction for depreciation loss on capital assets. You can do this for those you own, lease or buy under a hire purchase agreement and use, or intend to use, in your business.
Revenue or capital expenses
Most businesses have both revenue and capital expenses:
- revenue expenses are generally items used in the day-to-day running of a business. They can be for things like stationery, rent and power. You can deduct these expenses in tax returns.
- capital expenses are for capital assets kept for longer than a year. These expenses can include computers, vehicles and machinery. Depreciation loss is only claimed on capital assets.
Deciding not to depreciate
Generally, businesses must claim depreciation on their capital assets. There may be assets you decide not to depreciate.
You need to tell us when you decide not to depreciate an asset.