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 fixed assets. Some assets don’t depreciate, including:
- trading stock
- franchise fees
- assets that cost less than $500
- intangible assets, like goodwill.
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're 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.
There are two 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 assets 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.