IRD Depreciation Rate Finder

IRD depreciation allows New Zealand businesses to deduct the cost of business assets over their useful life, reducing taxable income each year. When you buy a business asset — such as equipment, vehicles, or furniture — you cannot deduct the full cost immediately (unless it qualifies for the low-value write-off). Instead, you claim a depreciation deduction each year based on the IRD-published depreciation rate for that asset type. IRD publishes a comprehensive list of asset types with approved economic depreciation rates, accessible through their depreciation rate finder tool online. The depreciation you claim reduces the asset's tax book value (adjusted tax value) over time. When you eventually sell the asset, the difference between the sale price and the book value may result in either depreciation recovered (taxable) or a loss on sale (deductible). Depreciation helps match the expense of an asset to the income it generates. Source: IRD — Depreciation (ird.govt.nz/income-tax/business/depreciation).

New Zealand businesses can choose between two main depreciation methods: diminishing value (DV) and straight-line (SL). Under the diminishing value method, the depreciation rate is applied to the asset's remaining book value (tax value) each year. This means you claim more depreciation in the early years and less in later years, because the base keeps reducing. DV front-loads deductions and is often preferred for cash flow reasons. Under the straight-line method, you depreciate a fixed percentage of the original cost each year, giving equal annual deductions throughout the asset's life. For example, a $10,000 asset at 20% SL gives $2,000 per year for 5 years. The same asset at 30% DV would give $3,000 in year 1, $2,100 in year 2, and so on. IRD publishes both DV and SL rates for each asset type. Once you choose a method for an asset, you generally must stick with it. Source: IRD — Depreciation Methods (ird.govt.nz/income-tax/business/depreciation).

The depreciation rules for buildings in New Zealand changed significantly in the 2020 Budget. Non-residential buildings (such as commercial premises, warehouses, and offices) can be depreciated at 2% per annum using the straight-line method, reinstated from the 2020-21 tax year after having been removed in 2012. Residential rental property buildings cannot be depreciated — the depreciation rate for residential buildings is 0% — a rule that has been in place since 2011 and was retained in the 2020 Budget. Land is never depreciable under any circumstances. Fit-out and fixtures within a building (such as carpet, air conditioning, or security systems) are typically treated as separate assets with their own depreciation rates. The building's structure (walls, roof, floor) is what is subject to the building depreciation rules; chattels inside can be depreciated separately. Source: IRD — Depreciation of Buildings (ird.govt.nz/income-tax/business/depreciation).

In New Zealand, assets that cost $1,000 or less (excluding GST if GST-registered) can be fully deducted as an expense in the year of purchase, rather than being depreciated over time. This low-value asset write-off threshold was increased from $500 to $1,000 on 17 March 2020, as part of the COVID-19 Business Continuity Package, and remains at $1,000 for the 2026-27 year. A temporary higher threshold of $5,000 applied for assets purchased between 17 March 2020 and 16 March 2021 only. If an asset costs more than $1,000, you must depreciate it at the relevant IRD rate over its useful life. The threshold applies to individual assets — you cannot split a single item into components to get under the $1,000 limit. However, if you buy several separate items of similar type, each item is assessed individually against the threshold. Source: IRD — Low-Value Asset Write-Off (ird.govt.nz/income-tax/business/depreciation).