Low-value asset threshold for depreciation
The NZ Government, in response to Covid-19 to help small businesses, passed legislation that temporarily increases the low-value asset threshold for depreciation from $500 to $5000. This allows business to deduct the full cost of your business asset with a value of $5000 or less in the year they purchased them instead of having to spread the cost over the life of an asset (i.e. depreciate the asset over time).
This temporary threshold increase is only valid until March 16th 2021.
For more information please visit the IRD’s website: https://www.ird.govt.nz/covid-19/business-and-organisations/specific-income-tax-issues/depreciation-and-low-value-assets
What this means for small businesses
This is a significant tax saving for business and a huge incentive to invest in assets. Being able to expense out the entire value of the asset immediately makes it a no-brainer for tradespeople to purchase new powertools, machinery and scaffolding before the temporary threshold timeframe increase runs out.
An example spend of $5000 could save you as much as $1400 on tax this financial year!
How do I take advantage of this?
We recommend speaking to your accountant or bookkeeper who will understand how this can be done.