As we face challenging economic times ahead the NZ Government has taken made some positive steps for owners of Commercial and Industrial property which current and new owners of commercial property can take advantage of. The announcement was made on the 17th March 2020 and is the first phase of the Covid-19 support package.
1. Reintroduction of the depreciation of Commercial and Industrial properties
Owners will be able to claim depreciation on commercial buildings for the 2020/2021 year, what this means is that if you have a building with a book value of say $2,000,000 then you could claim at diminishing value of 2% which would be $40,000, based on a company tax rate of 28% you will have $11,200 less to pay in tax for the 2020/2021 period.
This cost saving is an important factor if you have been considering refurbishment or seismic strengthening of a building you own as you can now take advantage of these proposed new tax incentives.
2. Deductions for Low Value Assets
Previously businesses have depreciated low value assets over the life of an asset, as part of the tax stimulus package the threshold for low value assets will increase from $500 to $5,000 during 2020/2021 and then in 2021/2023 reduce to $1,000. This will enable owners to deduct the full cost of the assets purchased during the 2020/2021 period rather than the deduction being made over the life of the asset.
What this means for you is that if you replaced an such as an air-conditioning unit for $4,500 within your commercial building the entire cost of the unit could be claimed during the 2020/2021 year which would reduce your tax paid by $1260.
If you have been needing to replace or upgrading any low value assets (less than $5,000) such as air-conditioning units or an alarm system etc, it would be a good time to consider this investment into your property with the tax benefits which are now available.
We recommend you seek financial advice from your accountant or tax specialist to further understand how you can best take advantage of these tax incentives.
For more information on the announcement: https://www.ird.govt.nz/Updates/News-Folder/covid-19-business-continuity-package