Low Value Asset Purchases
In March 2020, the NZ Government introduced legislation to temporarily raise the threshold for depreciation on low-value assets from $500 with the aim to stimulate the economy during the Covid pandemic by encouraging people to invest in their businesses.
Early last year the special Covid concession was permanently changed but there appears to be ongoing confusion as to what the threshold is. This confusion can lead to an underestimation of tax if you claim all assets purchases an an expense.
The rule now is that if you purchase an asset which is $1,000 or less excluding GST then you claim that purchase as an expense (deductible fixed asset) like any other business expense. However if the asset is $1001 or more excluding GST then it must be recorded as a fixed asset and then depreciated over time.
In order to claim you will need a proof of purchase to support your records. Note that there are some terms and conditions in the rule which apply to the threshold:
If you are uncertain as to whether the asset purchased can be claimed an expense or must be depreciated talk to our team and we can guide you on the best tax treatment.
Early last year the special Covid concession was permanently changed but there appears to be ongoing confusion as to what the threshold is. This confusion can lead to an underestimation of tax if you claim all assets purchases an an expense.
The rule now is that if you purchase an asset which is $1,000 or less excluding GST then you claim that purchase as an expense (deductible fixed asset) like any other business expense. However if the asset is $1001 or more excluding GST then it must be recorded as a fixed asset and then depreciated over time.
In order to claim you will need a proof of purchase to support your records. Note that there are some terms and conditions in the rule which apply to the threshold:
- If you bought multiple assets at the same time from the same supplier and it cost $1,000.00 (noting that it has the same depreciation rate), the threshold applies across all the assets acquired.
- The “cost” pertains to GST exclusive for a GST registered and GST inclusive for a non GST registered.
- If the asset is being acquired in the form or part of another asset, the deduction is immediately not applicable.
If you are uncertain as to whether the asset purchased can be claimed an expense or must be depreciated talk to our team and we can guide you on the best tax treatment.
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