What is Depreciation & How Does it Work?


As a business owner or property investor you’re entitled to make a tax claim for depreciation – but what exactly is depreciation?

It’s best described as the devaluation of your assets over a number of years and different assets have different life spans so that’s why the depreciation rates differ.

An asset is defined as an item costing over a threshold set by Inland Revenue which will be used on an ongoing basis to help generate taxable income. Examples are plant & machinery, computers, chattels (stoves, carpet), vehicles etc.


Current IRD asset thresholds

Prior to 17 March 2020 = $500

17 March 2020 – 16 March 2021 = $5,000

16 March 2021 onwards = $1,000


From the month that you purchase the asset you can claim a percentage of it (based on IRD’s depreciation rates) as a tax deductible expense which can be offset against your income (just like all other business costs).

So you don’t get to claim the whole cost at once, it’s spread out over a number of years.

Each year it’s worth reviewing your asset register to see if anything has broken, not able to be used anymore and we can then write this off fully giving you a tax claim on any residual balance.

As always if you’re not sure of anything please do contact us, we enjoy chatting with you



About Kiwitax – Award winning business improvement, tax and accounting service

Here’s the thing. As a businessrental property owner or start-up, you get a kick out of having your own gig. But chances are dealing with your tax and accounting leaves you cold. Good news! We love it, so hand it over to Kiwitax and we’ll look after it all for you.

Whether you deal with us online, by phone or drop into our Napier office, you’ll find a friendly, professional hardworking team ready to work with you, however you keep track of your financial information and from wherever you do business. And all for a fixed price. It takes just two minutes to get a quote.

Plus if you’re at a loss to know how to improve aspects of your business – from growth planning to cashflow management, even tax debt and so much more – we’re all over that too. Our Business Improvement advisors can help you make a plan and put it into action.

Kiwitax are a preferred training provider for Business Improvement services through the Regional Business Partner Network Capability Voucher Scheme. This is a government funded scheme designed to boost business capability by providing funding of up to 50% of approved training programs with specified training providers up to a maximum value of $5000.

If you liked this article and want to make improvements in your business, with quarterly coaching sessions specifically tailored to support you to identify and achieve your business goals, lets chat!