Depreciation: claiming assets over $1,000

Anything you buy for the business at $1,000 or less (before GST) can be claimed immediately, and you won't need to track it after that. This guide is about what happens above that line: the laptop, the camera rig, and the tools that cost real money. You still get the deduction, but it is spread over the asset's life, and the mechanics only take a few minutes to understand.

How depreciation spreads the deduction

Depreciation spreads an asset's cost across the years it earns you income. Each year you claim that year's share, and the asset's tax book value drops by the same amount. When the value is written down, or the asset is sold, the claiming stops. Every asset class has an IRD-set rate, and you can look yours up with the rate finder in the references.

The two methods

• Diminishing value (DV): the rate applies to the remaining book value, so the claim is biggest in year one and shrinks each year: a $3,000 laptop at 50% DV claims $1,500, then $750, then $375, and so on.
• Straight line (SL): the rate applies to the original cost, so the claim is level: the same laptop at 40% SL claims $1,200 a year until written off.

The lifetime total is identical, and only the timing differs. Most contractors take DV so the deductions come earlier, which is usually worth more than the same amount later. Straight line mainly suits people who want level, predictable claims. You choose per asset.

The rate that matters most

For desk-based contractors, one class matters most: computers, meaning laptops and desktops, run at 50% DV or 40% SL, reflecting a roughly four-year useful life. Phones, furniture, cameras, and tools each have their own class and rate. You'll want to look each one up rather than guessing, because the rate drives the whole calculation.

Investment Boost: 20% of a new asset up front

For anything new bought from 22 May 2025, there's an extra deduction on top of normal depreciation. Investment Boost lets you deduct 20% of a new (or new-to-New-Zealand) asset's cost in the year it's first available to use, and the remaining cost then depreciates the usual way over the years that follow. Nothing is lost. A fifth of the deduction is brought forward to year one.

A $3,000 laptop bought new claims $600 straight away (the 20% boost), and the other $2,400 depreciates at its normal rate from there. There's no cap on how much you can claim this way. The catch is the word new: second-hand gear bought within New Zealand doesn't qualify, and residential rental buildings are excluded.

Pooling: one line instead of many

Low-value assets can be grouped into a pool and depreciated together as a single figure, so a drawer full of small assets becomes one line of bookkeeping. The catch to know before using it is that once an asset goes into the pool, it doesn't come out. If you only have two or three assets over $1,000, tracking them one by one is usually simpler than pooling.

Selling the asset: the wash-up

Depreciation is an estimate, and the sale trues it up. If you sell for more than the tax book value, the difference, up to the original cost, is depreciation recovery. That counts as taxable income, because you claimed more wear than actually happened. If you sell for less, the shortfall is a deductible loss. In practice, when you sell or trade in business gear, put the sale price in the records next to the book value, because the difference lands in your return either way.

How Coffer helps

Mark an expense as a capital asset and Coffer takes it from there. It suggests a depreciation method and rate from the kind of asset, and flags Investment Boost if the asset qualifies. Coffer works out each year's deduction for as long as the asset is still writing down, and folds it into the income tax it ringfences from every payment. Each asset shows in the Assets view with its cost, this year's depreciation, and what's been claimed so far. Coffer doesn't handle the tax wash-up when you sell an asset yet, though that's on the roadmap. Until then it keeps depreciating the asset on the normal schedule.