SBA

Depreciation allows for the wear and tear on a fixed asset and must be deducted from your income. You must claim depreciation on fixed assets used in your business that have a useful lifespan of more than 12 months. Not all fixed assets can be depreciated. Land is a common example of a fixed asset that cannot be depreciated. Learn about methods of depreciation and the records you must keep.

Diminishing value depreciation

The amount of depreciation is worked out on the adjusted tax value of the asset. This value is the original cost less any depreciation already claimed in previous years. If you are registered for GST the original cost price should not include GST you have already claimed in your GST return.

Straight line depreciation

Depreciation is calculated on the original cost price of the asset, and the same amount is claimed each year. If you are registered for GST, the cost excludes any GST you have already claimed in your GST return.

Assets costing $500 or less (including loose tools)

Low-value assets, that is, assets that cost $500 or less, are deductible in the year they are acquired or created provided:

• they are not purchased from the same supplier at the same time as other assets to which the same depreciation rate applies (unless the entire purchase costs $500 or less)
• the assets will not become part of an asset that is depreciable, for example, the cost of materials to build a wall in a factory
• they were purchased on or after 19 May 2005 (the threshold before 19 May 2005 was $200.00)