Low Value Asset Threshold
You may remember in the wake of the first nationwide lockdown the Government made amendments to the Income Tax Act 2007 that increased the threshold for expensing assets in the year of purchase. That increase was temporary and we are fast approaching the date for another change in threshold.
The increase of the threshold amount from $500 to $5,000 (+GST for GST registered taxpayers) for assets acquired on, or after 17 March 2020 and before 17 March 2021 was introduced as a temporary measure to cushion the economic impact of the COVID-19 virus for the 2020–21 income year. For assets purchased on or after 17 March 2021, this threshold will become $1,000.
To be eligible for treatment as a low-value item, the asset must be of a separate nature. It cannot be an asset that was or will become part of another asset that is depreciable property. Another restriction is that the item cannot be purchased from the same supplier at the same time as other assets to which the same depreciation rate applies. That restriction might apply, for example, to the purchase of a set of tables and chairs where the total cost exceeds the threshold but the cost for each individual item does not. However, if the entire purchase costs less than $5,000 (or $1,000 after 17 March 2021), treatment as a low-value item continues to be available.
It may be necessary to recognise depreciation recovery income if a low-value item is sold or applied for private purposes. If the asset is sold, the entire sale proceeds are assessable income in the year in which the asset is sold. If the asset becomes a private asset, the market value of the asset when it is first used privately becomes assessable income.
Should you have any questions regarding the treatment of any assets you have acquired please do not hesitate to get contact your Greenlion Advisor.