If an asset costs $1,000 or less, you can generally claim the whole cost as a deduction in the year you buy it, instead of depreciating it over its life. The test is GST-exclusive if you’re GST-registered and GST-inclusive if you’re not. The traps are items bought together, parts of a bigger asset, and the interaction with Investment Boost, which is where Inland Revenue’s new draft guidance focuses.
This is a numbers guide: where the line sits, what a write-off is worth in actual cash, and the purchases that quietly fall on the wrong side.
What exactly is the $1,000 rule?
Ordinarily you depreciate business assets, claiming a slice of cost each year at an IRD-set rate. The low-value asset rule is an election to skip that and deduct the whole cost immediately (the provision is section EE 38 of the Income Tax Act 2007). It has applied at $1,000 since 17 March 2021, after a temporary $5,000 threshold during COVID.
Two points trip people up:
- It’s per item of property, not per invoice. A $4,000 invoice can contain several qualifying assets.
- It’s your cost, not the sticker price. Whether GST sits inside that cost depends on your registration.
GST-registered or not: which number do you test?
| Your status | Test this cost | A $1,100 purchase (GST-inclusive) |
|---|---|---|
| GST-registered | GST-exclusive cost | $956.52 excl. GST, so it qualifies |
| Not GST-registered | GST-inclusive cost | $1,100, so it doesn’t qualify |
The cut-off for a registered business is therefore a GST-inclusive price of $1,150, because $1,150 ÷ 1.15 = $1,000 exactly. Even at exactly $1,000 there’s a wording wrinkle: the legislation uses a “$1,000 or less” test, while parts of IRD’s draft describe it as “below” $1,000. Don’t engineer a purchase to land on the exact figure.
What is a low value asset write-off worth in cash?
A deduction isn’t cash. It’s the tax you don’t pay. At the 28% company rate:
| Asset cost (GST-exclusive) | Tax saved if written off now | Net cost after tax |
|---|---|---|
| $400 | $112 | $288 |
| $950 | $266 | $684 |
| $1,000 | $280 | $720 |
If you depreciated that $950 asset instead, you’d collect the same total deduction, only spread across years. So the write-off is a timing benefit: the full $266 lands in this year’s tax calculation rather than part of it. It also saves bookkeeping, because you don’t carry a $950 item on the depreciation schedule for years.
The cash effect still matters for a business with provisional tax coming up. Our GST and provisional tax planner shows how a lower profit figure changes what you set aside.
Which purchases fail the test?
This is the section that saves the most arguments with an accountant.
Items bought together
IRD’s October 2026 draft says that where you buy items with the same depreciation rate at the same time from the same supplier, the deduction applies only if the group’s total cost is within $1,000. It’s the draft’s reading, not final, but it’s a sensible way to plan.
Example scenario — illustrative only. A café owner buys six identical stools at $400 each, GST-exclusive, in one order. Each looks like a low-value asset. As a group the cost is $2,400, so they may not qualify and would be depreciated instead.
Parts of a bigger asset
A $3,200 compressor with a separately priced $900 hose kit isn’t two assets if the kit is a component of the compressor. IRD’s earlier interpretation statement IS 25/03 deals with identifying the relevant “item of property”, and the draft refers back to it. If a part is useless on its own, assume it belongs with the main asset.
Just over the line, rescued by Investment Boost
Investment Boost gives a 20% up-front deduction on qualifying new assets. The $1,000 test is measured before that deduction. The draft’s own example is a phone costing $1,125 GST-exclusive: Investment Boost of $225 would bring it to $900, but it still isn’t a low-value asset. For the full picture of how the two interact, see depreciation and buying equipment before 31 March.
For an asset between $1,000 and a few thousand dollars, you may still get a meaningful up-front deduction through Investment Boost if it’s new or new to New Zealand. For something second-hand from a NZ seller, you’ll be depreciating it.
What happens when you sell it?
Writing off the cost means the asset’s tax book value is zero. If you later sell it for $300, that $300 is generally depreciation recovery income. IRD’s draft covers this too. For hand tools and laptops that’s a small number. It matters if you routinely flip written-off equipment, or run a hire fleet of $900 items.
What’s changing: IRD’s draft PUB00533
IRD released draft interpretation statement PUB00533 (income tax, depreciation of low-value assets) for consultation on 9 October 2026, with comments due by 20 November 2026. In plain terms it covers:
- how the immediate deduction under section EE 38 works;
- how the test applies when you buy several items together;
- when depreciation recovery income arises on disposal;
- how the $1,000 is measured when Investment Boost is in play.
It’s a draft. It reflects the Commissioner’s preliminary views and can’t be relied on until finalised. If the final version moves the goalposts on grouped purchases, a bulk order of “cheap” items is where it would bite. The sensible habit now is to record what you bought, from whom and on what date, so you can show your reasoning either way.
Does the write-off change how you should fund a purchase?
It can, in two ways.
Small purchases rarely need finance. If the whole fit-out is a handful of sub-$1,000 items, you’re simply deciding whether to use cash or an overdraft.
Mixed shopping lists are where it gets interesting. A new workshop or kitchen usually combines a few large assets (depreciated or eligible for Investment Boost) with a long tail of small items (written off immediately). The deductions arrive at tax time, but the invoices arrive now. That mismatch is a cash flow gap, not a tax problem, and it’s the thing worth planning around.
Example scenario — illustrative only. A joinery startup fits out a workshop: a $48,000 CNC router, plus $9,000 of clamps, benches and hand tools bought as individual items under $1,000 each. The router gets Investment Boost and depreciation; the small items may be written off straight away. The deductions are real, but the $57,000 still needs paying before the tax benefit shows up. That’s where an equipment funding conversation fits, and the lease vs buy vs borrow comparison helps you decide how to pay.
If a purchase or fit-out is on the horizon and you’d rather not drain working capital to buy it, check your options with a 60-second enquiry.
A quick checklist before you click “buy”
- Know your GST status. It decides whether you test the GST-exclusive or GST-inclusive figure.
- List items individually, with the cost of each, not just the invoice total.
- Watch same-day, same-supplier orders of identical items.
- Don’t split a machine into parts to dodge the threshold.
- Check Investment Boost for anything over $1,000 that’s new.
- Keep records of what was bought, when, and what each item is used for.
- Ask your accountant about borderline items. It’s a ten-minute question that’s cheaper than a reassessment.
When the deductions are good but the cash isn’t
A tax deduction is a refund of sorts, but it arrives at the end of the year, and it only helps if you can afford to buy in the first place. If you’re stocking a new site, replacing gear that has died, or taking on a contract that needs kit before the first invoice, the timing gap is the real problem.
We’d rather you looked at the numbers properly than made a rushed call at the counter. Enquiring takes about 60 seconds and your credit file isn’t touched just for asking. We don’t pass your details around a stack of lenders, so your phone won’t light up with offers you didn’t ask for. A real person looks at your situation and calls you, and if you fill the form in accurately we can point you to the right option first time.