Low-value asset threshold for depreciation
The ability for businesses to claim immediate deductions for low value assets up to the value of $5,000 will be a welcome incentive to invest in assets. This comes at a time when many businesses may be investing in technology assets to ensure that employees are able to work from home if needed. The existing tax rule allows an immediate deduction for assets up to a value of $500; noting that there are some caveats to this rule which we expect will also apply to the new $5,000 threshold:
- If multiple assets with the same depreciation rate are acquired from the same supplier at the same time, the $5,000 threshold applies across all the assets acquired (it is not a per asset threshold);
- If the asset being acquired actually forms part of another item of depreciable property an immediate deduction is not available.
This change is a temporary measure which applies for one year commencing 17 March 2020. From the 17 March 2021, the threshold will move back to $1,000, which is still a significant improvement on the existing $500 threshold (which has not been increased since 19 May 2005).
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