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  1. #1
    Join Date
    Sep 2004
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    Hastings
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    Default Category / Analysis for Sub $500 Assets

    As I understand it, small assets ($500 or less) can be written off in the year of purchase.

    Nonetheless, how is it accounted for?

    Put in the depreciation schedule and written off @ 100% in the year of purchase?

    Or should there be some separate expense category where such things go?
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  2. #2
    Join Date
    Oct 2013
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    Default

    Quote Originally Posted by Perry View Post
    As I understand it, small assets ($500 or less) can be written off in the year of purchase.

    Nonetheless, how is it accounted for?

    Put in the depreciation schedule and written off @ 100% in the year of purchase?

    Or should there be some separate expense category where such things go?
    FYI, it is currently $5,000 or less from mid-March 2020 to mid-March 2021, then $1,000 thereafter. The $500 is a thing of the past.

    But to answer your question, most accountants put this to repairs and maintenance. Strictly I dont think there is an official way of accounting for it. But this treatment works from an efficiency perspective, and overall makes sense most of the time - that new microwave is "maintaining" the house... sorta.

    I have seen the 100% depreciation and subsequently written off method, and I have seen a "low value assets" expense code, but neither are very common.
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  3. #3

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    Hello Anthonyacat

    So, if a $3,500 heat pump purchased in June is put down as repairs and maintenance this year, does that mean the item does not appear in the Asset Register? The new heat pump simply does not appear anywhere in the balance sheet (as an asset), or does it appear, but with a zero value?

  4. #4
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    Oct 2013
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    1,729

    Default

    Quote Originally Posted by learner View Post
    Hello Anthonyacat

    So, if a $3,500 heat pump purchased in June is put down as repairs and maintenance this year, does that mean the item does not appear in the Asset Register? The new heat pump simply does not appear anywhere in the balance sheet (as an asset), or does it appear, but with a zero value?
    Most common practice is to write off in full. Never touches balance sheet.

    Same way a $50 chair or $400 oven always used to be treated.

    Putting it on the balance sheet or asset register just creates unnecessary work.
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  5. #5

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    Quote Originally Posted by Anthonyacat View Post
    Most common practice is to write off in full. Never touches balance sheet.

    Same way a $50 chair or $400 oven always used to be treated.

    Putting it on the balance sheet or asset register just creates unnecessary work.

    Another way is pooling low value assets, but agreed it's a matter of time you want to spend on it.

  6. #6

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    Quote Originally Posted by Anthonyacat View Post
    Most common practice is to write off in full. Never touches balance sheet.

    Same way a $50 chair or $400 oven always used to be treated.

    Putting it on the balance sheet or asset register just creates unnecessary work.

    What happens when I replace this in 10 yrs... if it was on the asset register then depreciated 100% it's easy to prove the replacement is R&M. Fast forward 10 yrs... in 2030 when i'm doing my yr end and i try to put my new heat pump down to R&M replacing the one I put in in 2020 will it be considered capital as from the POV of my accounts the asset doesn't exist?

  7. #7
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    Oct 2013
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    Default

    Quote Originally Posted by Don't believe the Hype View Post
    What happens when I replace this in 10 yrs... if it was on the asset register then depreciated 100% it's easy to prove the replacement is R&M. Fast forward 10 yrs... in 2030 when i'm doing my yr end and i try to put my new heat pump down to R&M replacing the one I put in in 2020 will it be considered capital as from the POV of my accounts the asset doesn't exist?
    If it was on your asset registered and depreciated 100%, you'd be writing that one off and capitalising the new one anyway.

    The whole 'like for like replacement is R&M' is only the case for parts of an asset (a roof, vinyl flooring, doors....) not replacement of the whole asset. If you haven't split Carpets out of your "Building" when you bought it, then when you replace the carpets there's a pretty solid argument for a full deduction - though some would still argue for capitalisation, I'd disagree. But if you've split the carpets out as a separate asset at purchase time, then when it's ripped out you remove that asset from the schedule, write off any remaining value, and capitalise the new one.
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  8. #8
    Join Date
    Sep 2004
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    Hastings
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    Default

    Anthony, do you have readily available, the related legislation reference?
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  9. #9
    Join Date
    Mar 2007
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    126

    Default

    Is the depreciation limit $5000 per property or $5000 per item/chattel? For instance, a heat pump @ $3500 and a range hood @ $2500 - would both be written off being under the limit? Cheers.

  10. #10
    Join Date
    Oct 2013
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    1,729

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    Quote Originally Posted by Perry View Post
    Anthony, do you have readily available, the related legislation reference?
    I do not! Had a quick look for it, but no luck. Afraid I'm an accountant with a good understanding of tax law, rather than a qualified tax lawyer. I've never read the legislation from cover to cover, just bits and bobs as I need to.


    Quote Originally Posted by King13 View Post
    Is the depreciation limit $5000 per property or $5000 per item/chattel? For instance, a heat pump @ $3500 and a range hood @ $2500 - would both be written off being under the limit? Cheers.
    Yes. Unless bought from the same provider on the same day, both deductible. Nothing to do with property, this $5k thing is for all businesses in the country, not just investors.
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