Depreciation: claiming assets over $1,000

Anything you buy for the business at $1,000 or less (before GST) is claimed immediately and never thought about again. This guide is about what happens above that line: the laptop, the camera rig, the tools that cost real money. The deduction still comes, spread over the asset's life, and the mechanics take about ten minutes to understand once.

The idea: the deduction follows the wearing out

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

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; only the timing differs. Most contractors take DV for the earlier deductions (money now beats money later), and SL mainly suits people who want level, predictable claims. You choose per asset.

The rate that matters most

For desk-based contractors, one class dominates: computers (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; look each one up rather than guessing, because the rate is 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 simply 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, which turns a drawer full of small assets into one line of bookkeeping. The catch to know before using it: once an asset goes into the pool, it doesn't come out. For a contractor whose over-$1,000 assets number two or three, per-asset tracking is usually simpler than pooling.

Selling the asset: the wash-up

Depreciation is an estimate, and the sale trues it up. Sell for more than the tax book value and the difference (up to the original cost) is depreciation recovery: taxable income, because you claimed more wear than actually happened. Sell for less and the shortfall is a deductible loss. The practical habit: when you sell or trade in business gear, the sale price goes 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. Give it a depreciation method and rate (Coffer suggests both from the kind of asset), flag Investment Boost if it qualifies, and Coffer works out each year's deduction for as long as the asset is still writing down, folding 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. Selling an asset has a tax wash-up Coffer doesn't handle yet (it's on the roadmap); until then it keeps depreciating an asset on the normal schedule.