Depreciation lets you deduct the cost of business assets over their useful life. IRD sets specific depreciation rates for hundreds of asset types. Claiming the right rate maximises your deductions — and understanding when to expense assets immediately (low-value asset rule) versus depreciate them over time is essential for tax efficiency.
Assets costing $1,000 or less (excl. GST) can be immediately expensed in full — no depreciation calculation required. Assets over $1,000 are depreciated over their useful life using IRD's prescribed rates. Two methods: Diminishing Value (DV — applied to the reducing book value each year) and Straight Line (SL — applied to the original cost each year). DV gives a larger deduction in early years; SL gives even annual deductions. Find exact rates at IRD's asset depreciation rate finder tool online.
The $1,000 Low-Value Asset Threshold
Since 17 March 2020, assets costing $1,000 or less (excl. GST) can be immediately deducted in full in the year of purchase. This is the low-value asset threshold.
- No depreciation schedule required
- Claim the full cost as an expense in your IR3 or company return
- Applies to each individual asset (not pooled)
Examples of assets immediately expensed:
- Office chair ($450) — deducted in full
- Power tools under $1,000 — deducted in full
- Software subscription under $1,000/year — deducted as an expense
- Printer ($800) — deducted in full
Note: Before 17 March 2020, the threshold was $500. If you have older assets on your depreciation schedule at $500–$1,000, they continue under the old rules.
Diminishing Value (DV) vs Straight-Line (SL)
| Method | How it works | Best for |
|---|---|---|
| Diminishing Value (DV) | Rate applied to the reducing book value each year | Larger deductions in early years; asset becomes “used up” faster for tax |
| Straight Line (SL) | Rate applied to original cost each year | Even deductions; easier to calculate |
Example — $5,000 computer, DV 67%, SL 40%:
| Year | DV method | SL method |
|---|---|---|
| Year 1 | $5,000 × 67% = $3,350 | $5,000 × 40% = $2,000 |
| Year 2 | ($5,000−$3,350) × 67% = $1,106 | $5,000 × 40% = $2,000 |
| Year 3 | $544 × 67% = $364 | $5,000 × 40% = $2,000 (last year) |
Most businesses prefer DV for the larger early deductions, but SL is simpler for budgeting.
The DV rate is always higher than the SL rate for the same asset (roughly: DV rate = SL rate × 1.5).
Common IRD Depreciation Rates 2025–26
Office and IT Equipment
| Asset | DV rate | SL rate | Useful life |
|---|---|---|---|
| Computers and laptops | 67% | 40% | ~2–3 years |
| Monitors | 67% | 40% | ~2–3 years |
| Printers | 30% | 21% | ~5 years |
| Mobile phones | 67% | 40% | ~2–3 years |
| General office furniture | 20% | 13.5% | ~8–10 years |
| Office chairs | 20% | 13.5% | ~8–10 years |
Vehicles
| Asset | DV rate | SL rate |
|---|---|---|
| Cars and station wagons | 30% | 21% |
| Utes and vans | 30% | 21% |
| Motorcycles | 30% | 21% |
| Trucks and heavy vehicles | 20–25% | 13.5–17% |
Note: Vehicle depreciation is limited by the motor vehicle cost threshold ($57,267 cost cap for PAYE and FBT purposes — applies to the depreciation base for vehicles used by shareholder-employees).
Building Fitout and Chattels
| Asset | DV rate | SL rate |
|---|---|---|
| Carpet | 25% | 17% |
| Air conditioning (split system) | 20% | 13.5% |
| Kitchen appliances (commercial) | 20–30% | 13.5–21% |
| HVAC systems (ducted) | 12.5% | 8.5% |
| Lighting fixtures | 20% | 13.5% |
Tools and Equipment
| Asset | DV rate | SL rate |
|---|---|---|
| Power tools (general) | 25–30% | 17–21% |
| Specialised machinery | Varies by type | Varies |
| Workshop equipment | 20–25% | 13.5–17% |
For exact rates: Use IRD’s online depreciation rate finder at ird.govt.nz — search by asset type or industry.
How to Calculate Depreciation
Year 1
$$\text{Depreciation} = \text{Cost price (excl. GST)} \times \text{DV rate}$$
Note: If the asset was only in use for part of the year, pro-rate by days:
$$\text{Depreciation} = \text{Cost} \times \text{DV rate} \times \frac{\text{Days held}}{365}$$
Subsequent Years (DV)
$$\text{Depreciation} = \text{Book value at start of year} \times \text{DV rate}$$
Book value = Cost − total depreciation claimed to date.
GST-registered businesses
Calculate depreciation on the GST-exclusive cost (you have already claimed the GST as an input tax credit separately).
GST-excluded businesses (e.g., residential landlords) calculate depreciation on the GST-inclusive cost.
Depreciation on Sale — Recovery
When you sell a depreciated asset:
- Sale price > book value: Depreciation recovery = sale price − book value = taxable income
- Sale price < book value: Residual loss = book value − sale price = deductible
Example:
- Computer: cost $3,000, depreciated to book value of $800
- Sold for $1,200
- Recovery: $1,200 − $800 = $400 taxable
Frequently Asked Questions
I bought a laptop for $1,500. Can I still claim it all this year?
At $1,500 (excl. GST), it exceeds the $1,000 low-value threshold and must be depreciated. Use 67% DV — year 1 deduction: $1,500 × 67% = $1,005.
What if I use an asset partly for business and partly privately?
Apply the depreciation to the business-use proportion. A laptop used 70% for business: $1,500 × 70% = $1,050 depreciable base, then apply the DV rate.
My asset has fully depreciated (book value $0). Is there any tax if I sell it for $200?
Yes — the $200 is a depreciation recovery and is taxable income.
I can’t find my asset type on the IRD rate finder. What do I use?
If the specific asset is not listed, use the rate for the most similar asset. Alternatively, apply the default rate for the industry category. IRD’s guidance allows reasonable estimates for unlisted assets.