What changed in 2024–25 and what it means for your farm

If you’re a farmer in New Zealand, you’ve likely heard whispers about changes to building depreciation rates. From the 2024–25 income year onwards, the government set the depreciation rate on commercial buildings with an estimated useful life of 50 years or more to zero percent. For many farm owners, this raises an urgent question: can I still claim depreciation on my dairy shed, implement shed, or woolshed?

The short answer is: it depends on the building. But the details matter—because getting this wrong could cost you thousands in legitimate tax deductions, or worse, expose you to compliance issues down the track.

At CMK Accountants, we’ve been helping Taranaki farming families navigate tax changes for nearly 70 years. Here’s what you need to know about the new depreciation rules and how they affect the buildings on your property.

Understanding the Core Rule Change

Let’s start with the basics. The Inland Revenue has ruled that buildings with an estimated useful life of 50 years or more now have a 0% depreciation rate. This means you can’t claim any annual depreciation deduction on these long-life structures.

This change replaced the previous 2% non-residential building rate that applied from 2021–22 to 2023–24. It’s a significant shift, and it doesn’t affect all farm buildings equally.

The critical question for each building on your property is simple: what’s its estimated useful life? If it’s less than 50 years, you can still claim depreciation. If it’s 50 years or more, your depreciation deduction just disappeared.

Your Dairy Shed: Good News

Can you still depreciate it? Yes, in most cases.

If you’re a dairy farmer, breathe a sigh of relief. Your dairy shed used for milking cows typically falls under the “dairy shed and yard” asset class. This class has an estimated useful life of 33⅓ years, which means it remains fully depreciable at either:

• Diminishing Value (DV) rate: 6%
• Straight Line (SL) rate: 4%

Here’s a practical example: Let’s say you built a new dairy shed in 2023 for $500,000. Under the diminishing value method at 6%, you’d claim $30,000 in depreciation in year one, $28,200 in year two, and so on. This deduction continues because your dairy shed has an estimated life well under the 50-year threshold.

Why does this matter? For a farming business in the 33% tax bracket, that first year’s $30,000 depreciation deduction saves you $9,900 in tax. Over the shed’s lifetime, you’re looking at substantial tax savings that help manage cashflow during tough seasons.

Key takeaway: Your dairy shed infrastructure remains a legitimate tax planning tool. Make sure your accountant has correctly classified it in your asset register.

Your Woolshed: Bad News

Can you still depreciate it? No.

If you’re a sheep farmer with a woolshed or shearing shed, this is where the new rules bite. Under Tax Depreciation Rates General Determination Number 92 (DEP92), wool and shearing sheds fall into the “Buildings and structures” category with an estimated useful life of 50 years.

This means from 2024–25 onwards, the depreciation rate is 0%. Even though these structures take a beating during shearing season and require ongoing maintenance, IRD considers them long-life assets.

Let’s put this in real terms: Imagine you invested $200,000 in a new woolshed in 2023. Under the previous rules, you could have claimed $4,000 per year in depreciation (at the 2% non-residential rate). Over 25 years, that’s $100,000 in tax deductions—or roughly $33,000 in tax savings for a business in the 33% bracket. Under the new rules? That’s gone.

What should you do? If you’re planning to build or upgrade a woolshed, factor this into your investment decision. The loss of depreciation deductions changes the after-tax cost of the project. You might also want to explore whether any fit-out or equipment (as opposed to the structure itself) can be depreciated separately.

Your Implement Shed: It’s Complicated

Can you still depreciate it? Maybe.

This is where things get nuanced. The answer for your tractor shed, equipment shed, or machinery storage depends entirely on how the structure is classified.

Scenario 1: Typical framed building

If your implement shed is a conventional structure—steel or timber framing, proper cladding, concrete floor, designed to last decades—it likely falls under the generic “Buildings (non-residential buildings)” class. These have 50-year useful lives, which means 0% depreciation from 2024–25 onwards.

Scenario 2: Lightweight shelter

If your structure is more like a lean-to, a pole shed with minimal sides, or a carport-style shelter, it may qualify as a shorter-life structure. For example, “Carports (freestanding or lean-to)” have a 33⅓-year life with DV 6% / SL 4% rates. If this classification applies, depreciation continues.

Here’s a real-world scenario: You have two equipment storage areas on your property. One is a $150,000 purpose-built shed with insulated walls and roller doors—this is almost certainly a 50-year building with 0% depreciation. The other is a $40,000 three-sided pole shed with a roof—this might qualify as a shorter-life structure still eligible for depreciation.

The difference? That $40,000 shelter at 6% DV gives you $2,400 in year-one depreciation, saving $792 in tax. The $150,000 shed gives you nothing.

The classification challenge

This is where professional advice becomes crucial. The line between a “building” and a “structure” isn’t always clear. IRD guidelines matter, but so does the specific design, materials, and intended use of your shed.

At CMK, we’ve seen farmers successfully argue for shorter-life classifications on simple structures, but we’ve also seen IRD challenge classifications that seemed aggressive. Getting it right from the start—ideally before you build—protects you from nasty surprises later.

What This Means for Your Farm Business Planning

These depreciation changes aren’t just technical tax details—they have real implications for your farming business.

Capital investment decisions. If you’re planning significant building projects, the depreciation treatment affects your true after-tax cost. A $300,000 building you can’t depreciate costs more in real terms than one with the same price tag but a 30-year life.

Asset register accuracy. Now more than ever, proper classification of your farm buildings matters. An incorrect classification could mean leaving money on the table or facing penalties during an IRD review.

Timing considerations. If you have buildings in progress or planned, the income year they’re commissioned affects which rules apply. Strategic timing could make a difference.

Succession planning. For families planning farm transitions, understanding which assets generate ongoing tax deductions affects how you structure ownership and what price makes sense for the next generation.

Your Next Steps

Here’s what we recommend for CMK clients navigating these changes:

Step 1: Review your current asset register with your accountant. Make sure every farm building is correctly classified with the right depreciation rate (or 0% if applicable).

Step 2: If you’re planning any building projects in the next 2–3 years, discuss depreciation implications before you commit. Design choices can affect classification.

Step 3: For implement sheds and similar structures, get professional advice on classification. There may be legitimate arguments for shorter-life treatment, but you need documentation to support your position.

Step 4: Consider the bigger picture. Depreciation is one tax planning tool among many. If you’ve lost deductions on buildings, are there other opportunities to optimise your farm’s tax position?

The Bottom Line

The 0% depreciation rate on 50-year buildings changes the landscape for New Zealand farmers. Your dairy shed is generally safe. Your woolshed is caught by the new rules. Your implement shed depends on specific facts.

But here’s the thing: every farm is different. The structures on your property, how they’re used, how they’re built, and how they’re classified all matter. Generic advice only takes you so far.

At CMK Accountants, we’ve spent nearly seven decades helping Taranaki farming families navigate exactly these kinds of challenges. We understand rural properties because we specialise in them. We know the IRD rules, but we also know the practical realities of running a farming business.

If you’re uncertain about how these depreciation changes affect your farm, or if you’re planning building projects and want to get the tax treatment right from the start, let’s talk. A conversation now could save you thousands in lost deductions—or protect you from costly mistakes down the track.

Contact CMK Accountants today to review your farm’s building depreciation and ensure you’re not leaving money on the table.