Low-value asset threshold for depreciation $5000. Could someone please explain this is laymans terms. My accountant mentioned it to me on the phone last year and I did not think much of it until I recently did an inspection. Now I want to look into this but of course accountant on holiday and I cant seem to understand the info on the internet. Has anyone taken up this proposal? thank you

mansonprincess - 2021-01-04 20:05:00

https://www.ird.govt.nz/covid-19/business-and-organisations/
specific-income-tax-issues/depreciation-and-low-value-assets

sparkychap - 2021-01-04 20:10:00

hi, my limited understanding is that up to March (16th???) 2021 you can purchase an item , for example a Heatpump, for your rental and so long as it is less than $5,000 you can claim it as an expense rather than a depreciable asset when you do your end of year tax return

Edited by stelke at 8:14 pm, Mon 4 Jan

stelke - 2021-01-04 20:12:00

that was my understanding as well but the more I read the more I seem to confuse myself, what if i wanted to update the bathroom? how would this work? new bath, tradie? would all of this be covered and do i have to do it all at the same time and if it goes over? do I just claim upto 5k

Ill have another read at the link provided but the more I read the less i feel I understand

Edited by mansonprincess at 8:46 pm, Mon 4 Jan

mansonprincess - 2021-01-04 20:44:00

It affects item from $500 to 5k that would normally pass into the depreciation list. This year you will be credited the depreciation value back straight off (on items up to a value of 5k). So if you bought a computer that was 4k, instead of it being listed with your assets and the value annually depreciating against your tax amount, this year it as all included. It is on any item, and on more expensive things as well, say a work car for 10k but 5k of its depreciation value comes out in this tax period. This is how I understand it.
On reading that, I see also after March this year that $500 limit for items moving to the depreciation list becomes $1000, which means in future anything valued under $1000 will go off against ones tax straight away.

Edited by bryalea at 8:45 am, Tue 5 Jan

bryalea - 2021-01-05 08:38:00

mansonprincess wrote:

that was my understanding as well but the more I read the more I seem to confuse myself, what if i wanted to update the bathroom? how would this work? new bath, tradie? would all of this be covered and do i have to do it all at the same time and if it goes over? do I just claim upto 5k

Ill have another read at the link provided but the more I read the less i feel I understand

I would think it would already be covered. I don't think "work" is listed on depreciation, and is a bath going to go on the list of items for depreciation normally if it cost over $500? if so well it won't now, and won't in the future unless it costs more than $1000.

bryalea - 2021-01-05 09:05:00

Business up to $10k, accountant told us to upgrade before 31 March.

gabbysnana - 2021-01-05 10:58:00

yes, spoke to my account and she said if your going to do anything massive, especially in a like for like situation then now it the time to do it, even though they are extending it to 1000 k anyhow, if you are looking at upgrading or doing a bit of reno then now is the time. I ran my ideas passed her and all sounds legit

mansonprincess - 2021-01-05 16:59:00

mansonprincess wrote:

that was my understanding as well but the more I read the more I seem to confuse myself, what if i wanted to update the bathroom? how would this work? new bath, tradie? would all of this be covered and do i have to do it all at the same time and if it goes over? do I just claim upto 5k

Ill have another read at the link provided but the more I read the less i feel I understand

But in this type of situation, wouldn't the 'bath' be part of an asset - not an asset in its own right? It isn't even as tho' the 'bath' would be removed and taken to a new location and re-installed or sold due to being surplus if the 'business' re-located.

brouser3 - 2021-01-05 19:50:00

Brouser, im just trying to find an actual example - basically if you buy a new asset the total amount will be capitalized. the IRD website is hopeless to be fair

mansonprincess - 2021-01-05 20:39:00

bryalea wrote:

I would think it would already be covered. I don't think "work" is listed on depreciation, and is a bath going to go on the list of items for depreciation normally if it cost over $500? if so well it won't now, and won't in the future unless it costs more than $1000.

im not just doing a bath, im pretty much planning on updating the whole bathroom like for like, which includes a bath over shower so all up, it will come to over 1000 k of course but hopefully be under 5000 k - might also change the cylinder over as well as at the moment its low pressure and not that great for the tenants

mansonprincess - 2021-01-05 21:15:00

mansonprincess wrote:

im not just doing a bath, im pretty much planning on updating the whole bathroom like for like, which includes a bath over shower so all up, it will come to over 1000 k of course but hopefully be under 5000 k - might also change the cylinder over as well as at the moment its low pressure and not that great for the tenants

What I was meaning was that it only matters where something would attract depreciation. The builder/plumber bill won't. That cost will come straight off
your tax bill. I am not sure things like a shower or hot water cylinder would either. They may and if so it would be individually. It is per each item not overall. But I would be pretty sure most of the " bill" on home improvements is covered under normal taxing. Things like a new heat pump would attract depreciation, however the installation wouldn't. That is how I see it anyway. As long as you have all the info for your accountant they will sort it out.

Edited by bryalea at 8:12 am, Wed 6 Jan

bryalea - 2021-01-06 08:11:00

thank you for explaining and I understand what your saying also - although i rang the accountant and ran past my ideas and she seemed to think that it would all be ok. the thing is, so many people dont understand it, me included and even when you talk to people, everyone has a different perspective - it would be ashame if people were trying to take advantage of this one off opportunity and could be all wrong about it. i just dont know

mansonprincess - 2021-01-06 10:52:00

"repairs and maintenance" are generally expensable, improvements are generally depreciable.

New equipment (assets) depreciable, repairs to assets expensable, replacing assets depreciable. Painting and decorating, maybe expensable or maybe not, new lino depreciable, replacing a section of lino expensable.

A lot of this is grey areas, what is a repair, what is an improvement.

Short version, now is a good time to get stuff done, even if for no other reason that it makes easy - if it's under 5k there is no question. I think part of your question is "what if it'small on the same invoice and the total is over 5k" that should be fine, as long as the invoice is itemised and the items in question are each under 5k.

bitsy_boffin - 2021-01-06 20:41:00

For doing up the bathroom, as long as there isn't structural extensions, the work is probably a repair, and immediately deductible.

The asset being repaired is the house, not the bathroom. A new shower, bath or vanity will be a repair rather than an asset.

Best to talk to your accountant about this, but you also have until mid march 2021 for the $5,000 asset threshold

tom-tk - 2021-01-06 22:17:00

Could it be argued that you are replacing like – for- like? I.e. replacing a bathroom…with a bathroom.

thumbs647 - 2021-01-07 06:08:00

i spoke with my accountant and the way i told it to her, she seems to think i will be fine but again she said the bigger picture is is the explanation of all of this and this is where so many people just dont get it - me included - i know the cut off is coming so I cant muck around so im just going to do what i need to do and try much luck i guess cause who knows where we will get another 5k write off....

mansonprincess - 2021-01-07 10:48:00

bitsy_boffin wrote:

"repa-
irs and maintenance" are generally expensable, improvements are generally depreciable.

New equipment (assets) depreciable, repairs to assets expensable, replacing assets depreciable. Painting and decorating, maybe expensable or maybe not, new lino depreciable, replacing a section of lino expensable.

A lot of this is grey areas, what is a repair, what is an improvement.

Short version, now is a good time to get stuff done, even if for no other reason that it makes easy - if it's under 5k there is no question. I think part of your question is "what if it'small on the same invoice and the total is over 5k" that should be fine, as long as the invoice is itemised and the items in question are each under 5k.

i like the way you have said it especially the bit when you say grey areas

mansonprincess - 2021-01-07 10:55:00