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COVID-19: Increase to immediate low-value asset write-offs

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Under changes introduced by the Government, property investors will receive an immediate tax deduction for any individual assets they buy costing up to $5,000.

The change will temporarily increase the small asset depreciation threshold from $500 to $5,000 for the tax year 2020/2021.

This means that you can receive a full tax deduction for the assets purchased irrelevant of the number of days held (rather than having to depreciate the assets over several years as per previous legislation). Use it as an opportunity to bring forward purchases for healthy homes like heat pumps.

This applies to the period between 17 Mar 2020 to 16 Mar 2021.

This write-off is not limited to once per entity or once per property. It applies to all low-value assets a business purchases during the year.

If a landlord owns multiple properties and making purchases that will exceed $5,000 on one invoice, these assets may require capitalisation. It's recommended to make these purchases on different days or from different suppliers to take advantage of an immediate tax deduction.

It is important to remember this is not a refund, it is a tax deduction. You will only get a portion of your money back.

The NZPIF started that the new ring-fencing rules may limit the benefit of this for many rental property providers. Please clarify with your accountant if these limitations apply to you.

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