Changes to Low Value Asset Threshold
24 February 2021
Jessica Powell & Leisa Kelsen |
Don’t miss the window for full deductibility of assets up to $5k
As part of the COVID relief package for businesses, the Government temporarily increased the low value asset limit from $500 to $5,000. From the 17th of March 2021 the low value asset threshold is set to change again, dropping from $5,000 to $1,000.
Business owners have an opportunity to maximise tax deductions while the increased threshold is still in place. Bringing forward any planned capital expenditure (CAPEX) which exceeds the $1,000 threshold but is less than the $5,000 threshold to happen before 17 March 2021 provides a way to do this. Note that these values are GST exclusive for GST registered businesses.
For those businesses who are strapped for cash the Small Business Cashflow (Loan) Scheme (SBCS) is still open for applications up until the 31 December 2023. Recent changes to the eligibility criteria of the SBCS allows the SBCS to be used to fund capital expenditure. Funds received from the SBCS can be reinvested into bringing forward CAPEX spending to take full advantage of the $5,000 low value asset limit while it lasts.
Read BDO's Small Business Cashflow (Loan) Scheme (SBCS) FAQ’s to determine whether your organisation may be eligible for the loan and the application process.
We advise it is best to get in contact with us before spending up large. Applications for the SBCS should be carefully considered and fully informed. And, as is always the case with tax, there are fish-hooks.
For example, care needs to be taken when buying multiple items of the same type of asset. Where the cost of each individual item is below $5,000 but the total cost of all of the individual items exceeds $5,000, you will be required to account for them as a group. e.g. 1 office desk worth $1,200 would be fully deductible, however five of the same office desks with a combined value of $6,000 would fall outside the low value asset limit.
Get in contact with your local BDO adviser to discuss the options for your business.