Depreciation and book value over time.
First-year depreciation
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Book value after the period
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Total depreciation claimed
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Your breakdown
Updates live as you type| Year | Opening value | Depreciation at 30% |
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Two ways to write down an asset
When a business buys something that lasts more than a year, a vehicle, a laptop, a coffee machine, you cannot deduct the whole cost in one hit. Instead you spread the deduction across the asset’s working life through depreciation, and Inland Revenue lets you choose between two methods. Diminishing value applies a fixed percentage to the remaining book value each year, so the deduction is large at first and shrinks over time. Straight line applies the same percentage to the original cost every year, giving an even deduction until the asset is written off. IRD publishes a rate for each category of asset, and the two methods use different rate tables, so do not assume a 30 percent diminishing-value rate equals 30 percent straight line.
This calculator takes the asset cost, your chosen annual rate, the method and the number of years you want to project. It returns the first-year deduction, the written-down book value at the end of the period, and the total depreciation claimed along the way. It is built for sole traders, contractors and small companies sorting their end-of-year accounts, or anyone weighing up which method suits a new purchase.
A $20,000 ute on the diminishing-value method
Say you buy a work vehicle for $20,000 and apply a 30 percent diminishing-value rate over five years. In year one the deduction is 30 percent of the full $20,000, which is $6,000. In year two you take 30 percent of what is left, $14,000, giving $4,200, and so on down the curve. The book value chases the floor but never quite reaches zero under this method.
After five years you have claimed $16,639 in deductions and the ute sits on your books at $3,361. The chart traces that declining book value, year by year.
What you can and cannot depreciate
Plant, machinery, vehicles, tools, computers and office fit-out are all depreciable. Buildings, however, are not. Tax depreciation on buildings was reinstated briefly and then removed again from the 2024-25 income year, so the structure of a commercial or residential building gives no deduction, though some fit-out items inside it still can. Low-value assets are the other useful wrinkle: an item costing $1,000 or less can generally be expensed in full in the year of purchase rather than depreciated, which saves you tracking a trivial book value for years. If you are buying a $900 monitor, just claim it.
The clawback when you sell
Depreciation is not free money, it is a timing benefit, and the catch arrives when you sell. If you dispose of the ute for more than its $3,361 book value, say $7,000, the difference up to the original cost is depreciation recovery income, taxable in the year of sale. You claimed deductions on the way down, so Inland Revenue reclaims them if the asset held its value better than the book suggested. New Zealand has no general capital gains tax, so a genuine gain above original cost on most business assets is not taxed, but the recovered depreciation always is. A common mistake I see is owners forgetting this and getting a surprise tax bill the year they upgrade the work vehicle. Plan for it.
Can I switch between diminishing value and straight line?
Yes. You can change the method on an asset from one income year to the next, and you do not need IRD’s permission. Some businesses start on diminishing value for the early cash-flow benefit, then switch to straight line later. Just apply the correct rate for whichever method you are using in that year, since the two rate tables differ.
Do I have to claim depreciation every year?
Generally yes, depreciation is not optional for assets used in your business. If you choose not to claim it, Inland Revenue can still treat the asset as if it had been depreciated when you sell, reducing the book value and increasing any recovery income. So skipping the deduction usually costs you twice. The cleaner path is to claim it each year and keep an accurate fixed-asset register.