Everyone gets confused about what assets are, what depreciation means and when is the best time to buy business assets from a tax point of view. Let me fill you in.
Fixed assets are items that you use for more than a year, like a car. In other words, they last longer than 12 months and so you spread the cost over several years using depreciation rates Inland Revenue provides.
Check out our new blog on depreciation if you’ve ever wondered about what that is and how that works.
But here is a rule that might save you a few tax dollars this year. From 17 March 2021, fixed assets that cost less than $1,000 can be written off immediately. You can waltz into Warehouse Stationery on the 31st March and buy a lovely new printer for $849 and the whole lot is tax deductible against your income in this financial year.
Please don’t rush out and buy things just to save tax (spending a dollar to save 28 cents does not make sense!) – but if you need office furniture or electronics and they cost under $1,000*, you might as well sneak that cost into this year.
* If multiple assets with the same depreciation rate are purchased from the same supplier at the same time, the $1,000 applies on a total basis – not to each asset. One phone costing $900 would meet the criteria to be an expense, but if three were purchased ($2,700), all three would need to be classified as an asset and depreciated.