IRD has released a draft interpretation statement explaining when taxpayers can claim an immediate deduction for low-value assets, with comments due by 20 November 2026.
New Zealand’s Inland Revenue has published a draft interpretation statement, Income tax – Depreciation of low-value assets (PUB00533) for public consultation on 9 October 2026.
The statement explains section EE 38 of the Income Tax Act 2007, which allows a taxpayer to elect to deduct the full capital cost of a low-value asset in the year of acquisition instead of depreciating it over its useful life.
Cost threshold
The threshold is NZD 1,000. It is measured excluding GST for GST-registered taxpayers and including GST for those not registered. The cost is determined before any Investment Boost deduction under subpart DI.
Separate item requirement
The deduction is not available for an item that forms, or will form, part of another item of depreciable property. This is a question of fact and degree, decided on the overall impression in each case. Physical distinctness and functional completeness point to a separate asset, while physical integration or being necessary to complete a larger asset points the other way. The statement refers to IS 25/03 for further guidance.
Group acquisition rule
Where items with the same depreciation rate are bought at the same time from the same supplier, the deduction applies only if the group’s total cost is within NZD 1,000.
Grouping is assessed by transaction, based on when title or ownership passes.
An exception applies where most items were acquired as trading stock but some, such as floor demonstration models, are not used solely for that purpose. The threshold is then tested against the combined cost of those items only.
Disposal and change of use
Any consideration received on later disposal of an asset deducted under section EE 38 is income. If the taxpayer stops using the asset mainly (more than 50%) for business or income-earning purposes, a deemed disposal occurs, and the asset’s market value must be returned as income.
Record keeping
Inland Revenue advises taxpayers to keep records, such as a fixed asset register, to track disposals and changes of use and calculate any resulting income.
The consultation closes on 20 November 2026.
