What is a Fixed Asset?
A fixed asset is something that has a cost of more than $1,000 + GST, and will last more that one year that will help you generate income.
It includes things like tools, machinery, computers, office furniture, vehicles, and buildings.
You may claim the GST on fixed assets usually in the month you pay for the fixed asset – or sign the documentation confirming you own the asset.
Fixed Assets are not allowed to be ‘claimed’ for income tax purposes 100% in the year purchased, the same as a usual business expense would be such as Rent – we are required to only write off a certain percentage of these fixed assets each year. These percentages are derived by IRD, and are called Depreciation Rates.
What is Depreciation?
Depreciation is the reduction in value of the recorded cost of a fixed asset.
For example a vehicle, you may pay $30,000 for – after two years the value would be reduced, due to wear and tear, mileage etc. Therefore, we would reduce the value of this asset in your accounts and tax returns by the established IRD yearly rate or percentage.