Low value assets threshold

Business, Compliance

For tax purposes, we must capitalise and depreciate assets that cost more than $1,000.

Any asset that costs less than $1,000 is considered an expense. It is added to your profit and loss statement and is fully deductible in the period to which it was incurred. Note that these values are GST exclusive for GST registered businesses.

From 17 March 2021, the low value assets threshold was reduced from $5,000 to $1,000. This is still a significant improvement on the existing $500 threshold which has not been increased since 19 May 2005. 

Please note the following:

If several assets with the same depreciation rate were purchased from the same supplier at the same time, the threshold applies to all the assets purchased, and not to each separate asset, this is capitalised so there is no immediate deduction available.

What is Capitalising?

Spreading the costs of an asset that is purchased over the life of the asset, rather than the period the expense was incurred. The asset is added to the company’s balance sheet and depreciated over its useful life.

What is depreciation?

The value of the asset depreciates over time and you can write off a certain amount as an expense against taxes every year.

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