Depreciation allows for the wear and tear on a fixed asset and must be deducted from your income.
Generally you must claim depreciation on fixed assets used in your business that have a lifespan of more than 12 months. However in special circumstances you can elect not to depreciate an asset by applying to the IRD.
Not all fixed assets can be depreciated. Land is a common example of a fixed asset that cannot be depreciated.
You will have to keep a fixed asset register to show assets you will be depreciating. This should show the depreciation claimed and adjusted tax value of each asset. The adjusted tax value is the asset’s cost price, less all depreciation calculated since purchase.
You are not able to claim depreciation on residential rental properties, however depreciation can be claimed on the assets within the property.
Previously depreciation could also not be claimed in respect of commercial buildings. This has since changed as a result of COVID. Depreciation is now able to be claimed on commercial buildings, from 1 April 2020.
For more information as to how to claim depreciation on assets or how to maintain an asset register, please contact us.
