Window for low-value assets about to close

The temporary increase in the low-value asset threshold from $500 to $5,000 will end on 16 March 2021, at which time the threshold will reduce to $1,000.

The Government introduced the temporary increase as part of their Covid support measures back in March 2020. The increase resulted in taxpayers being able to claim a tax deduction for asset purchases of $5,000 or less. Previously purchases over $500 had to be capitalised, and if depreciable, expensed over the life of the asset. In the case of non-depreciable items, such as building improvements to a residential rental property, no tax deduction was allowed.

While the low-value asset threshold applies to all taxpayers, it is particularly relevant for residential property landlords considering undertaking improvements to bring their property in line with the Healthy Homes Standards. If this is you, look to undertake the improvements before 17 March 2021 as the purchase of items to meet the new Healthy Homes Standards, such as new insulation, heat pumps, opening windows, and extractor fans that cost $5,000 or less are now able to be fully expensed if paid for on or before 16 March 2021.

Don’t leave the improvements until after 16 March 2021 when the deduction threshold drops down to a meagre $1,000.