When is the right time to invest in business assets?
Well, there’s no time like the present. If you’ve been through the teenage years you are unlikely not to have heard this phrase, and it may or may not bring back good memories! But seriously – if you are thinking about investing in business assets, then 2020 really is a good time. Here are three reasons why:
Interest rates are at an all-time low
The Reserve Bank of New Zealand held its official cash rate (OCR) at a record low of 0.25% on 11 November 2020. Economists are predicting that this will be a semi-permanent change to the economic environment. It also seems likely that that early next year will see the OCR drop below zero. Banks now vie to offer the lowest interest rates and it is definitely not a good time to be depositing money. So, if you have money in a term deposit that could be used to invest in business assets, or you need to borrow in order to invest, there really is no time like the present
Small Business Cashflow Loans Scheme
The government has just extended the COVID-19 Small Business Cashflow Loans Scheme. Not only that, the restrictions have been eased. When the scheme was first introduced it was directed specifically at helping businesses with core operating costs while COVID-19 restrictions were in place. The loan scheme has now been extended for a further 3 years (until 31st December 2023) and significantly, can now be used to invest in business development. You still need to show a 30% decline in revenue as a result of COVID-19. If you are able to do this, this loan offers a 3% interest rate for five years and if you pay it back in full within two years, there is no interest to be paid.
Depreciation threshold has changed
As a result of COVID-19 the Inland Revenue have made two changes to depreciation. Firstly, for the 2020-2021 income year they are changing depreciation for all commercial and industrial buildings. This was previously set at 0% and the changes are there to help business cash flow in the short term and to help long term recovery by encouraging businesses to invest in new and existing buildings.
Secondly the low-value asset threshold for depreciation has increased temporarily (until 16th March 2021) from $500 to $5,000. This will allow businesses to deduct the full cost of business assets with a value of less than $5,000 in the year they were purchased. From the 17th March 2021 this threshold will be $1,000.
Get in touch
If you are thinking about investing in business assets, there really is no time like the present. Contact us if you have any questions or want to discuss best way to invest in assets for your business.