The low-value asset write-off threshold has increased to $5,000 in New Zealand, but only until 16 March 2021

As a property manager, you’ve likely had to purchase new assets across your portfolio within the last year, whether it’s a washing machine, new heat pump, or ventilation system. 

And while in the past, acquiring a new asset for your business meant depreciating the cost over time, this year, a very inviting tax opportunity in New Zealand could see you putting the full deduction in your pocket upfront.

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TLDR: Give me the five must-knows on this New Zealand tax break

1. The low-value asset write-off threshold has increased to $5,000. This amount is the total cost of the asset, including installation. 
2. The threshold increase is temporary and only in place until 16 March 2021. (That is next month folks). After this date, the threshold will be $1,000. 
3. To write-off the asset, it needs to be purchased and installed between 17 March 2020 and 16 March 2021. 
4. The threshold applies to individual assets, as long as they were purchased on different days from different suppliers. 
5. Building materials don’t count; the purchase must be a distinct asset.

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What’s the low-value asset write-off threshold?

The low-value asset write-off threshold determines whether you can instantly write-off an asset or need to depreciate it over time. 

Since 2015, the threshold has been $500, meaning any expenditures exceeding this amount, from computers to ladders, ends up being depreciated.

In a bid to keep small and medium businesses spending throughout COVID-19, the government lifted the threshold to $5,000. Instant write-offs of this size can help with cash flow and mean companies don’t have to wait years to see tax benefits on their capital assets. 

This elevated $5,000 threshold is temporary. After 16 March 2021, the threshold will change again and remain for the foreseeable future at $1,000, still doubling what it’s been historically.

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Okay, what does a higher threshold mean for property managers?

For property managers, a higher threshold means the ability to write-off more necessary expenditures. This is especially appealing with the Healthy Homes deadlines appearing on the horizon. 

Assets bought to meet new minimum standards for heating and ventilation can be claimed back in full, as long as their total cost, including installation, is under $5,000. 

There is no limit to the number of assets claimed, so you can write-off both that $1,500 bathroom extraction fan and that $4,500 heat pump for the same property. 

You can also write-off similar assets across multiple properties, as long as they are purchased on separate days or from different suppliers. (Purchasing ten heat pumps at once from the same supplier would likely exceed the $5,000 threshold). 

An article from Good Returns points out that property managers setting up a furnished property could also take advantage of this tax break by writing-off beds, couches, and even TVs. 

Always have a chat with your accountant about what will work best for your situation. Remember, a tax break isn’t an excuse to spend extra money but can be helpful when you need to spend the money anyway. 

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Find out more about depreciation and the low-value asset write-off threshold from IRD.