Automatically depreciating your assets in Solo is a great way to reduce your tax bill. Once an asset has been added to Solo it will automatically be depreciated over time and included in Solo's 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. You claim depreciation on assets instead of claiming them as expenses.
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 in Solo.
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.
How to add an asset to Solo
Click the Assets link in the main menu (or inside the More tab in the mobile app).
Click the Add asset button.
You will then be presented with a form to enter the details of your asset.
Here's what the form options mean:
Description: A short description to help you identify the asset. E.g. 'Work laptop'.
Type: Select which type best suits your asset. The asset type only effects where the depreciation is recorded in your IR10 tax return form. The type you select has no effect on how much depreciation is claimed so don't worry too much 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. If you've owned the asset for a while and are now starting to use it for business, then enter the value the asset is currently worth (what you would get for it 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, please enter the percentage of business use here. E.g. a laptop that you use 60% for business and 40% for personal use.
Claim GST: Enable the switch to claim GST on the asset. The purchase price you enter must be GST inclusive and the full GST amount will be claimed at the purchase date. E.g. If you purchased a laptop on February 8 for $2,750 (GST inc) then the GST amount of $358.70 will be added to you February GST return and the remaining $2,391.30 will be depreciated. Solo will automatically calculate the GST amount and depreciate the remaining GST exclusive amount.
Note: The 'Claim GST' switch will only be displayed if you have GST enabled in Solo's settings.
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 Add asset form, click the Save and Close button and your asset will be added to Solo.
Book value: The current value of the asset for accounting purposes. The asset 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 is asset depreciation calculated?
Once you have added an asset, depreciation will be automatically calculated on a monthly basis and included in Solo's calculations. Solo will continue to depreciate the asset over time until it's value reaches $0.
Deprecation is allocated on a per monthly basis regardless of how many days of the month the asset has been owned. E.g. if a laptop is purchased on 30th of January and depreciation is $82.50 per month, then $82.50 will be claimed for January. And on the 1st of February another $82.50 will be claimed for February.
Note: If you have added assets to Solo you will notice a change in the some of Solo's figures at the start of each new month as the depreciation is included.
You can see how much depreciation is being claimed for any date range by checking the Profit & Loss report on the Insights page:
For more detail on how Diminishing value (DV) and Straight line (SL) depreciation is calculated please refer to the IRDs website:
How is depreciation claimed in my tax returns?
When you add an asset to Solo the depreciation for that asset will be automatically included in Solo's Income tax (IR3) and Financial statement (IR10) calculations. You can also check the depreciation for any time period by using the Profit & Loss report on the Insights page.
To check your tax return figures at any time, go to the Taxes page and click on the Preview button for the Income Tax period. In the Balance sheet section of the IR10 Financial statement you will be able to see the amount deducted for each asset type as well as the total asset amount deducted.
If you have GST enabled in Solo's settings, and have also enabled GST for the asset, then the GST amount of the purchase price will be included in the GST return that corresponds to the purchase date.
Solo includes your asset deductions when calculating the following:
Total expenses amount
Income tax calculations
Provisional tax calculations
GST calculation (if GST is enabled)
IR3 tax return
IR10 Financial statements summary
Selling or disposing of an asset
Currently Solo doesn't support selling or disposing of an asset. However we will be adding functionality for this as soon as we can.
How do I delete an asset?
Click the title of the asset you would like to delete.
Click the trash icon in the bottom right of the Edit asset form.
Click the Delete button.
Note: When you delete an asset all deductions relating to this asset will be permanently removed from Solo’s calculations.