You can now automatically calculate depreciation on your fixed assets and reduce your tax bill with Solo. Adding an asset to Solo is simple. Your assets will be automatically depreciated over time and included in Solo’s real-time tax calculations.
Assets are items costing over $1,000 that a business keeps for longer than a year. Also called capital assets or fixed assets, they can include computers, vehicles and machinery. Instead of claiming assets as an expense, you depreciate them over time.
Note: Items costing under $1,000 or that you intend to use in your business for less than a year should be claimed as an expense.
You can claim a deduction for depreciation on assets you own, lease or buy under a hire purchase agreement and use, or intend to use, in your business.
Adding your assets to Solo
Adding an asset to Solo is easy. Simply go to the Assets page in the main menu, click the Add asset button and enter the details of your asset.
The asset details are:
- Description: A short description to help you identify the asset. E.g. ‘Work laptop’.
- Type: Select you asset type. The asset type only effects where the depreciation is recorded in your IR10 tax return. The type doesn’t effect how much depreciation is claimed so you don’t need to worry about which type you choose.
- Purchase price: The value of the asset when you started using it in your business. This is usually the amount you paid for the asset. Or, if you’ve owned the asset for a while and are now starting to use it for business, the value the asset is currently worth if you sold it.
- Purchase date: The date that you purchased the asset or started using it in your business.
- Percentage of business use: If the asset is not used 100% for business, then enter the percentage of business use.
- Claim GST: To claim GST on an asset simply toggle claim GST to on. The full GST amount will be claimed at the purchase date. Solo will automatically calculate the GST amount and depreciate the remaining GST exclusive amount.
- Depreciation rate: The depreciation rate determines how quickly the asset is claimed. Each asset has a specific rate depending on which depreciation method you use. E.g. the rate for a laptop is 50% when using the diminishing value method and 40% for the straight line method. To find the rate for your asset, click the Find a rate link and use IRD’s depreciation rate guide.
- Select depreciation method: There are two depreciation methods to choose from; Diminishing value (DV) and Straight line (SL). The total depreciation you can claim over an asset’s life is the same for both methods. DV depreciates at a high rate for the start of an asset’s life and has a reducing rate each year. SL depreciates at the same rate each year. Use DV if you want to claim the asset depreciation quickly and use SL if you would prefer to spread the depreciation over a longer period of time. The most commonly used method is DV.
When you’ve filled out the form, click Save and your asset will be added to Solo. You can add as many assets as you need.
- Book value: The current value of the asset for accounting purposes. The book value will decrease as it depreciates. When the value reaches $0 the asset will be fully depreciated.
- Claimed: The total amount of deduction that has been claimed for the asset to date.
How does Solo calculate depreciation?
Solo automatically calculates depreciation on your assets each month and includes the correct deduction in Solo’s tax calculations. The asset will continue to be depreciated over time until it’s book value reaches $0.
You can see how much depreciation is being claimed for any date range by checking the Profit & Loss report on the Insights page:
How is depreciation claimed in my tax returns?
When you add an asset to Solo the depreciation for the asset will be automatically included in Solo’s Income tax (IR3) and Financial statement (IR10) calculations. You can preview your tax returns at any time and you can also check the depreciation for any time period by using the Profit & Loss report on the Insights page.
If you have GST enabled then the GST amount of the purchase price will be included in the relevant GST return.
Solo automatically includes your asset deductions when calculating the following:
- Total expenses amount
- Income tax calculations
- Provisional tax calculations
- ACC calculation
- GST calculation
- IR3 tax return
- IR10 Financial statements summary
- Exported data
That’s it. Simply add an asset to Solo and Solo will automatically calculate depreciation.
For more detail on how Solo calculates depreciation check out our help centre.