How to Claim Tools in New Zealand (2026 Guide)

Quick answer

Self-employed tradespeople and businesses deduct tools costing $1,000 or less in full in the year of purchase under the low-value asset rule, and depreciate anything dearer; a new tool above the threshold first available on or after 22 May 2025 also gets Investment Boost, 20% of its cost deducted upfront with the remaining 80% depreciated ^{[2] [3]} . Repairs and consumables are deducted as incurred. Employees on wages cannot claim tools at all because of the employment limitation; a tax-free tool allowance from the employer is the answer there. GST on tools is claimable as input tax, and second-hand tools from private sellers carry a notional credit.

Are tools tax deductible in New Zealand?

For a business, yes. Tools are depreciable assets, and Inland Revenue’s low-value asset rule removes most of them from the depreciation schedule. Since 17 March 2021 an asset costing $1,000 or less can be deducted in full in the year it is bought, instead of being depreciated over its life. For a GST-registered business the $1,000 is measured excluding GST. The rule is lost where several assets with the same depreciation rate are bought at the same time from the same supplier and together cost more than $1,000, which prevents a $3,000 tool chest being invoiced as a dozen separate items.

Tools above the threshold are depreciated. You pick diminishing value or straight line and apply the general rate for the asset class from the IR265 schedule, reissued in March 2026, at the business-use proportion. Most hand and power tools fall into trade-specific classes with rates in the 20% to 40% diminishing value range, and the rate finder on Inland Revenue’s website returns the figure for a named asset. Low-value assets that you choose not to write off immediately can also be pooled and depreciated together.

Employees are the exception that surprises people. New Zealand’s employment limitation means an apprentice or qualified tradesperson on wages cannot deduct tools, boots, or any other work cost against their salary. The employer side handles it: a tool allowance or reimbursement that covers a genuine work-related cost is exempt income for the employee and deductible for the business. The New Zealand construction and tradie guide covers the industry detail.

Running costs are deductible for every business: repairs and maintenance, consumables such as blades and abrasives, insurance on the tool kit, and interest on finance used to buy tools, all at the business-use percentage.

How much can you claim?

Worked example: a self-employed Tauranga electrician, GST registered, buys a $980 (GST exclusive) multimeter kit, a $340 drill, $260 of consumables, and a $2,600 thermal imaging camera in the year, all for business. The multimeter kit and drill are each under $1,000 and are deducted in full, $1,320. The consumables are a revenue expense, $260. The camera is depreciated; at a 40% diminishing value rate bought at the start of the year it gives $1,040. Total deductions in year one: $2,620, worth about $865 at the 33% marginal rate, plus input tax of 15% on every purchase.

Tools carried in a work vehicle do not change the vehicle claim, but a fitted tool module is itself an asset.

GST on tools

A GST-registered business claims the 15% GST on tools as input tax at the business-use percentage. Taxable supply information must match the amount: a till receipt under $200, the supplier’s GST number and the GST amount from $200 to $1,000, and the buyer’s details above $1,000. Second-hand tools bought from a private seller who is not registered carry no GST on the invoice, but the buyer can claim a secondhand goods credit of three twenty-thirds of the price as long as the seller’s name, address, the date, and a description are recorded. The New Zealand GST guide covers both rules.

Record-keeping requirements

Keep the receipt for every tool and record the GST-exclusive cost, because the $1,000 test is applied to it. For depreciated tools keep a fixed asset schedule with the date, cost, rate, method, and business-use percentage. For second-hand purchases keep the seller’s details with the record. Records must be kept for seven years. The New Zealand record-keeping guide covers digital formats.

How to claim, step by step

1. Split purchases into tools at $1,000 or less (GST exclusive), tools above it, and consumables.
2. Deduct the low-value tools and the consumables in full in the year.
3. Add tools over $1,000 to the fixed asset register and depreciate at the class rate, pro-rated in the first year.
4. Check that no bundle from one supplier breaches the $1,000 test.
5. Claim input tax on the GST return, using the secondhand goods credit for private-seller purchases.
6. Employers: pay a documented tool allowance rather than leaving tradespeople to claim nothing.

Common mistakes

• Applying the $1,000 test to the GST-inclusive price when registered.
• Splitting one supplier’s bundle into separate invoices to get under the threshold.
• Employees claiming tools on an IR3 when the employment limitation blocks it.
• Missing the secondhand goods credit on tools bought from a private seller.
• Treating a replacement tool as a repair.

Software that helps

• Dext captures merchant receipts by photo so site purchases are not lost.
• ExpenseFlow reads tool and merchant invoices with frontier vision AI, codes each line to an expense or fixed asset account using the $1,000 low-value asset threshold, explains the call under the line, lowers its confidence so a reviewer decides when the invoice does not settle it, and syncs approved items to Xero with the receipt attached, or to QuickBooks Online as a coded bill.
• Xero carries a fixed asset register that handles low-value pooling and first-year pro-rating.

FAQ

See the answered questions above for the $1,000 rule, depreciation, employees, second-hand GST, and repairs.