How Depreciation Works for NZ Tradies
When you buy tools or equipment for your business, you generally can't deduct the full cost in the year of purchase (unless it's under $1,000 — see low-value asset rule below). Instead, you claim depreciation over the asset's useful life.
The Low-Value Asset Rule
Good news: Items costing $1,000 or less (ex GST) can be written off in full in the year of purchase. This covers most hand tools, drill bits, small power tools, and accessories.
For anything over $1,000, you depreciate it over time.
IRD Depreciation Rates for Tradies
IRD publishes depreciation rates for different asset types. The diminishing value (DV) method is most common:
| Asset | DV rate |
|---|---|
| Power tools (drill, grinder, saw) | 30% |
| Hand tools | 30% |
| Ladders, scaffolding | 25% |
| Work vehicles (utes, vans) | 20% |
| Trailers | 13.5% |
| Computers, tablets | 48% |
| Mobile phones | 67% |
Full rate table at ird.govt.nz/depreciation.
Business vs Private Use
If you use equipment for both business and private purposes (e.g. a ute you also use on weekends), you can only claim the business-use percentage. Keep a logbook to support your claim.
Tracking Depreciation
Your accountant or a tool like Xero can manage a fixed asset register that automatically calculates annual depreciation. Well worth it once you have more than a handful of assets.