The Low-Value Asset Threshold for Depreciation after March 16 2021.

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The temporary increase to $5,000 for the low-value asset threshold for depreciation ended on March 16th

This means if you bought something before the 16th of March 2021, you could write off the whole amount against your taxable income this year.

Depreciation spreads the cost of assets that you buy for your business, by claiming a deduction from the IRD in your tax return.

In March 2020, the NZ Government introduced legislation to temporarily raise the threshold for depreciation on low-value assets from $500 to $5,000. The aim of this change was to stimulate the economy during the Covid pandemic by encouraging people to invest in their businesses.

The change to the $5,000 threshold ends 16 March 2021

What does this mean for you?

  • Businesses (including landlords) can deduct the entire cost of an item (under $5,000) in the year it was purchased, instead of spreading the cost over the life of the asset.
  • The distinct asset must be bought between 17th March 2020 and 16th March 2021.

The raised threshold change is only available until March 16th, 2021. For assets purchased on or after 17 March 2021, the new threshold will be permanently set at $1,000.

In order to claim you will need 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 $5,000.00 (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.

Talk to us for further information.

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