As you may already be aware, IRD have made some changes to the small asset threshold as part of the COVID-19 support package. These changes apply to all taxpayers, not just those affected by COVID-19, and provide an increased opportunity to claim a full deduction for what would have typically been capital expenditure.
Assets costing equal to or below the following thresholds (GST exclusive if you’re able to claim the GST) can be treated as tax deductible rather than depreciable capital assets:
- $500 for assets acquired on or before 16th March 2020
- $5,000 for assets acquired on or between 17th March 2020 and 16th March 2021
- $1,000 for assets acquired on or after 17th March 2021
The temporary lift in the threshold to $5,000 for the year from 17th March 2020 opens an opportunity for those needing to replace assets, to do so whilst also getting a tax deduction. The permanent lift to $1,000 after 17th March 2021 will also allow a greater number of low value assets to be fully deductible on an ongoing basis.
Take care though when purchasing assets in groups as the threshold applies to groups of assets that fall within the same depreciation rate. For example, purchasing three laptops at once costing $2,000 each would be over the threshold as the total transaction is $6,000. If the same purchase was done over three separate days, the amount per transaction is below the threshold so the cost can be claimed.
If in doubt, please contact your client manager to discuss how these thresholds may impact you and how you can manage the purchase to keep it below the threshold.