Business depreciation?

[nallac]

Hey there, I'm trying to Do my books for the first time and can't get my head around Depreciation on my Assets.

For example they say Est Useful life on a Vehicle is 10 years, Depreciate @20% ,
what if the Vehicle is 23 years old? Do i still use it as 20% per year?. Cause it's already devalued by heaps?.


Also what about second hand equipment I bought during the year, do they still depreciate at the same % as per IRD265 guide?.

20 yo welder
8 yo Mower
5 yo Weadeater
ETC

Is there a $ cut off where you can class new(second hand equipment) as an expense rather than an asset?

[scumdog]

And what about my 58 year old truck - is it worth a minus quantity???:(

[nallac]

And what about my 58 year old truck - is it worth a minus quantity???:(

yep, give me a coupla hundy and I'll take it off your Hands :2thumbsup

[Ocean1]

Hey there, I'm trying to Do my books for the first time and can't get my head around Depreciation on my Assets.

For example they say Est Useful life on a Vehicle is 10 years, Depreciate @20% ,
what if the Vehicle is 23 years old? Do i still use it as 20% per year?. Cause it's already devalued by heaps?.


Also what about second hand equipment I bought during the year, do they still depreciate at the same % as per IRD265 guide?.

20 yo welder
8 yo Mower
5 yo Weadeater
ETC

Is there a $ cut off where you can class new(second hand equipment) as an expense rather than an asset?

If you're doing it for the first time the company has paid for this stuff within the last year, yes? Or is this simply the first time you're doing it?

Don't matter really, the important thing is that you've got an invoice showing how much you paid for the capital plant. You have to pay tax on that money as if you still had it, you're only allowed to claim that 20% as a business cost.

And no, there's a schedule of depreciable assets, computers for example used to be 2 years, software 12 months.

And generally if it's under $400 odd bucks nobody is going to worry if you simply call it an expense and deduct the lot.

Edit: Don't forget any purchases from someone not registered for GST work a bit different. If you buy a mower, for example for, say $100 from someone on trademe who's not registered for GST then you get to claim a $15 GST credit.

[nallac]

If you're doing it for the first time the company has paid for this stuff within the last year, yes? Or is this simply the first time you're doing it?

Don't matter really, the important thing is that you've got an invoice showing how much you paid for the capital plant. You have to pay tax on that money as if you still had it, you're only allowed to claim that 20% as a business cost.

And no, there's a schedule of depreciable assets, computers for example used to be 2 years, software 12 months. So i still depreciate at said amount in IRD schedule?

And generally if it's under $400 odd bucks nobody is going to worry if you simply call it an expense and deduct the lot.

yep first time, owned the business a year now.

All of the equipment was under $400each except the welder, so it'd be easier to just to call them expense's then.

Is that $400 in total or Items under $400?


No worries with GST i don't earn enough for that headache....

[Ocean1]

yep first time, owned the business a year now.

All of the equipment was under $400each except the welder, so it'd be easier to just to call them expense's then.

Is that $400 in total or Items under $400?


No worries with GST i don't earn enough for that headache....


Per item. But I'm not an accountant, much less an IRD hatchet man, so make yourself familiar with the basics.

Just make sure you leave about 25% of your income in the bank to cover terminal tax and you should be fine.

[nallac]

Per item. But I'm not an accountant, much less an IRD hatchet man, so make yourself familiar with the basics.

Just make sure you leave about 25% of your income in the bank to cover terminal tax and you should be fine.

Found this online ...

Assets costing $500 or less (including loose tools)
Low-value assets ( 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)

[Ocean1]

So i still depreciate at said amount in IRD schedule?

If computers are still 2 years you'd be depreciating them at 50%.

They can get a bit pedantic as to what is a capital asset. Friend blew up his truck engine, spent about $12k on a shortblock and a mechanic's time and accounted for it as maintenance. Of course.

Not so, sayeth the IRD. The truck is now worth more as a result of the spendup, so you can claim just 20% of that $12k this year mate, now let's have that $2500 odd difference. Now. We don't care that you don't have it. We don't care that you spent it on fixing your truck, it's ours, if you didn't have it you should've borrowed the $12k for the repairs.



Don't mind me, I'm a tad jaded by it all...

[Ocean1]

Found this online ...

Assets costing $500 or less (including loose tools)
Low-value assets ( 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)

Well there y'go, good spotting.

And yes, another friend used to buy outboard motor parts and sell 'em. He'd buy a container full of head units and another container full of drives. It was WAY cheaper than paying the import tax Aannnd depreciation on, to take an example completely at random a fully assembled outboard motor.

[fridayflash]

it all gets a bit tricky, my accountant has been good and advised me over the years what to depreciate ...the main thing to be aware of is anything you depreciate..and then want to sell later, you'd have to repay a certain amount...unless you say it was totally kaput and thrown away, or in my case i would depreciate a work van, but when i was finished with it..itd have to send it to the wreckers..or at least say i did.if that makes sense at all

[skippa1]

oceans right, particularly about terminal tax and putting 25%away as they will hit you for it no matter how tough it's been making a crust. Acc as well.....they will be looking for their cut.
generally with depreciation you can claim all of the low cost items in the first 12 months as you have found. 10 years is a longtime for vehicles, we use 6-7 years on commercial vehicles, straight line depreciation , ie, fixed percentage every year but don't forget most big assets have a residual value at the end and if you sell them you will have to pay tax on the difference between what you depreciated the item to and the sale price.

Edit.....as above, if you sell an asset for more than the depreciated value, you owe that difference to IRD

[JimO]

it all gets a bit tricky, my accountant has been good and advised me over the years what to depreciate ...the main thing to be aware of is anything you depreciate..and then want to sell later, you'd have to repay a certain amount...unless you say it was totally kaput and thrown away, or in my case i would depreciate a work van, but when i was finished with it..itd have to send it to the wreckers..or at least say i did.if that makes sense at all
my last hilux was on the books for 6k, i traded it on a new one for 30k

[skippa1]

my last hilux was on the books for 6k, i traded it on a new one for 30k
what did the dealer give you as a trade?

[Brett]

Mate, if you're doing any decent level of turnover, pay an accountant. Honestly, they will save you money you never realised could be saved (if they're decent). The peace of mind is good too.

[nallac]

Mate, if you're doing any decent level of turnover, pay an accountant. Honestly, they will save you money you never realised could be saved (if they're decent). The peace of mind is good too.


Yep i do realize they can make it look like you earn nothing... Unfortunately i do earn next to nothing so can't afford to pay for one....

Down 68k from last year and 95k from the year before..... but am enjoying life so much more.......The new missus ain't high maintenance like the ex wife was.
Don't no where the next set of tyres for the bike is coming from but hey...

[skippa1]

Yep i do realize they can make it look like you earn nothing... Unfortunately i do earn next to nothing so can't afford to pay for one....

Down 68k from last year and 95k from the year before..... but am enjoying life so much more.......The new missus ain't high maintenance like the ex wife was.
Don't no where the next set of tyres for the bike is coming from but hey...
You doing the cold kiwi?

[nallac]

You doing the cold kiwi?


Hell yeah, won't miss that. even if i have to sell a kid, i got 3 of em anyway..

Just need to get in a clutch cable from oz b4 then....

[imdying]

Get an accountant. They're deductable and save you more money than they cost by far.

[nallac]

Get an accountant. They're deductable and save you more money than they cost by far.

I would do but first you have to pay them... Bit hard when ya living on the smell of a rag, can't even afford the oil to make it a oily rag

[Ocean1]

Edit.....as above, if you sell an asset for more than the depreciated value, you owe that difference to IRD

And if the difference between book value and sale price is too much they'll hit you up for "use of money" charges.

[Mom]

Hey there, I'm trying to Do my books for the first time and can't get my head around Depreciation on my Assets.

For example they say Est Useful life on a Vehicle is 10 years, Depreciate @20% ,
what if the Vehicle is 23 years old? Do i still use it as 20% per year?. Cause it's already devalued by heaps?.


Also what about second hand equipment I bought during the year, do they still depreciate at the same % as per IRD265 guide?.

20 yo welder
8 yo Mower
5 yo Weadeater
ETC

Is there a $ cut off where you can class new(second hand equipment) as an expense rather than an asset?

The purchase price is the opening value of the asset. It depreciates in value as per the schedule each year until it has no value on the books. Ring me or visit, I can help with this shit. Anything under $500 can be expensed and does not need to be in your asset schedule. Just have an expense code called assets under $500 in your accounts.

[neels]

Ring IRD and ask them directly, will save you trying to guess and getting it wrong.

But general rule for purchases is under $500 expense it, over $500 capitalise it and depreciate. Repairs and maintenance depends on what you are doing, repairing existing is generally expensed, complete replacement with new is capitalised.

[JimO]

what did the dealer give you as a trade?
the dealer gave me 30k

[skippa1]

the dealer gave me 30k
Watch out for the audit then

[nallac]

The purchase price is the opening value of the asset. It depreciates in value as per the schedule each year until it has no value on the books. Ring me or visit, I can help with this shit. Anything under $500 can be expensed and does not need to be in your asset schedule. Just have an expense code called assets under $500 in your accounts.

Thanks Anne i will be in touch.