Tools & Equipment — New Zealand Tax Rules

Claim trade tools, machinery, and business equipment as low-value assets or through IRD's depreciation schedule.

Claimable: Fully claimable · Tax authority: Inland Revenue

Inland Revenue Rules

• Tools and equipment costing NZ$1,000 or less (GST exclusive) per item can be expensed immediately as low-value assets in the year of purchase.
• Items costing over NZ$1,000 must be depreciated over their estimated useful life using IRD's published depreciation rates.
• If equipment is used for both business and personal purposes, claim only the business proportion of the cost or depreciation.
• Hire and lease costs for equipment are deductible as operating expenses in the period of use — no depreciation calculation needed.
• Replacement of like-for-like tools due to wear and tear can typically be expensed as a revenue cost.
• Maintenance and repair costs for business tools are separately deductible in the year incurred.

Limits

Low-value asset threshold: NZ$1,000 per item (GST exclusive) — expense immediately. Above NZ$1,000: depreciate at IRD's applicable rate over the estimated useful life.

Worked Example

Te Koha is a self-employed mechanic. He buys: socket set NZ$450 (low-value — expensed immediately), torque wrench NZ$280 (low-value — expensed), and a NZ$3,800 diagnostic machine (over NZ$1,000 — depreciated at 30% DV: year 1 claim NZ$1,140). He also pays NZ$600 to hire a specialist hoist for a job — expensed as hire cost. Total 2024/25 claim: NZ$450 + NZ$280 + NZ$1,140 + NZ$600 = NZ$2,470.

Record Keeping

• Keep purchase receipts and tax invoices for all tools and equipment
• Maintain a depreciation schedule for items over NZ$1,000
• Record hire and lease agreements and all rental invoices
• Note the business-use percentage for any dual-use equipment
• Keep records of maintenance and repair invoices for business tools

Frequently Asked Questions

What is the NZ$1,000 low-value asset threshold and how does it work?

Any single tool or piece of equipment costing NZ$1,000 or less (GST exclusive) can be written off immediately as a low-value asset in the year of purchase. You do not need to depreciate it over multiple years. This significantly simplifies record-keeping for small tools and saves tax earlier.

Can I claim power tools and hand tools used in my trade?

Yes. All tools required for your trade are deductible — either as low-value assets (under NZ$1,000) or through depreciation (over NZ$1,000). This includes power tools, hand tools, specialised instruments, and safety equipment.

What about renting or hiring equipment for a specific job?

Rental and hire costs are fully deductible as operating expenses in the period the hire relates to. No depreciation schedule is needed — simply expense the hire invoice in the tax year it is incurred.

Can I claim the cost of equipment I bought before starting my business?

If you bring existing personal equipment into your business, you may be able to claim depreciation from the point it enters business use. The 'cost' for depreciation purposes is its market value at the time it was first used for business. Document the entry of the asset into your business and its value at that point.

How do tool and equipment costs affect Provisional Tax, and how are they entered in myIR?

Tool costs reduce your taxable net profit and therefore your Residual Income Tax (RIT), which lowers your Provisional Tax instalments. In myIR, low-value asset costs (under NZ$1,000) are entered directly as expenses in your IR3. Depreciation on items over NZ$1,000 is calculated separately and the annual deduction entered in the 'Depreciation' expenses field. Keep your depreciation schedule as supporting records.