Question

Peni Tamalolo commenced a bakery business on 1 April 2019 and would like to claim maximum depreciation (as a business deduction) for the assets which he purchased for his new business shown below.

Asset	Date of acquisition	Cost ($)
Ovens	3 April 2019	30,000
Tin and trays	15 April 2019	4,500
Slicing Machines	6 May 2019	3,700

Required:

Find the applicable depreciation rates for the assets shown above from the IRD website and calculate the amount of depreciation loss for the income tax year ended 31 March 2020 for Peni’s business assuming the pool method is used for all assets costing $5,000 and under. Show all workings

Answer 1

The depreciation rate for Ovens assuming it as freestanding equipment as per Inland revenue depreciation rates which we are planning to take the maximum depreciation in the year of purchase will be available under Diminishing value method @ 13%.

Therefore the depreciation loss for the Ovens are =30000*13% = 3,900.

Under pool method of deprecition two or more assets were pooled into one asset which were having a value of less $5,000 and depreciated together.

The depreciation rates for Tin and trays was not available but Slicing machine depreciation rates as per the IRD website was 13%.

Therefore Tin and trays and Slicing machines together amounting to 8,200 shall be depreciated @ 13 %..

Depreciation loss for the above two assets are =8200*13% 1,066