Welcome to 2021. Here’s hoping that this year will see a return to the normal state of things, or at least more normal than it has been!
You may recall that one of the measures introduced by the government to stimulate spending during the COVID-19 downturn was an increase to the low-value asset write-off threshold. For those who may not be familiar with this provision, it allows you to fully tax deduct (i.e. 100%) for the cost of an asset as soon as it’s acquired, provided it’s below the relevant threshold.
Prior to 17 March 2020, this threshold was $500. Due to COVID-19 this was temporarily increased to $5,000, but it will go down to $1,000 from 17 March 2021. One might ask why the government didn’t make these changes effective from 1 April instead of two weeks before the end of the financial year, but ours is not to reason why.
For businesses who are considering asset purchases at between $1,000 and $5,000, to get the best tax result they need to complete the purchase before 16 March 2021
There are, naturally, a couple of catches to bear in mind, the most important condition being that items purchased at the same time from the same supplier and depreciated at the same rate are treated as a single purchase for the purposes of the threshold. Be careful with that last part especially – if you go shopping for a whole bunch of computer gear with the same depreciation rates.
Don’t forget the threshold changes on 16 March 2021, so if you want to take advantage of the higher threshold, get your shopping done before St Patrick’s Day!