Is It An Asset?

ASSETS

An asset is a fixed or long-term item purchased for over $1,000* that provides enduring value to your business. Examples include vehicles, computers, or machinery.

When an asset is purchased, the full cost cannot be claimed as an expense for income tax purposes. Instead, it is depreciated over time. Depreciation allows a percentage of the purchase price to be claimed as an expense each year, following rates set by the IRD.

These rates vary depending on the item’s lifespan—for instance, computers (short lifespan) have higher depreciation rates than cars (long lifespan).

In Xero, if you are using our standard chart of accounts, codes for assets include:

• 741 – Motor Vehicles
• 751 – Furniture and Fittings
• 761 – Office Equipment (e.g., Computers and Phones)
• 771 – Plant and Equipment (e.g., Machinery and Tools)

LOW-VALUE ASSETS

Low-value assets are fixed or long-term items costing less than $1,000. Examples might include a power drill or an inexpensive vehicle.

These are sometimes referred to as minor assets or assets under $1,000.

In Xero, the standard chart of accounts code for low-value assets is:

• 406 – Minor Assets

REPAIRS AND MAINTENANCE

Repairs and maintenance involve fixing existing assets, such as calibrating machinery or
repairing a vehicle engine.

In Xero, the standard chart of accounts code for repairs and maintenance is:

• 450 – Repairs and Maintenance 

Note: Some work on assets may not qualify as repairs but instead as improvements.

For example:

• Adding a canopy to a ute that did not previously have one.
• Upgrading machinery with superior parts rather than replacing like-for-like when such improvements occur, they are treated as part of the asset and depreciated accordingly.

NEED CLARIFICATION?

Determining whether a purchase is an asset, repair, or something else can sometimes be unclear. If you’re uncertain, it’s best to consult with us to ensure correct classification.