How does the threshold rule work?
If you spend $100 or less to acquire a tangible asset in the ordinary course of carrying on your business you can assume it to be of a revenue nature for income tax purposes.
This rule does not apply to expenditure on:
- establishing a business or business venture or building-up a significant store or stockpile of assets
- assets held by you under a lease, hire purchase or similar arrangement
- assets acquired by you for lease or hire to (or that will otherwise be used by) another entity
- assets included in an asset register you maintain in a manner consistent with reporting requirements under accepted Australian accounting standards
- any asset that forms part of a collection of assets that is dealt with commercially as a collection (for example, by being sold and leased-back as a means of raising finance for the business)
- trading stock or spare parts.
This rule does not apply separately to expenditure on assets that are part of another composite asset. In this case, you must test expenditure on the composite asset. Items would not normally be a separate asset where they are not functional on their own (for example, scaffolding clamps).
Some examples of low cost items that fall within the threshold rule, subject to the qualifications listed above, are:
- office equipment costing $100 or less including hand held staplers, hole punches, manilla folders, ring binders, geometry sets, stencils, calculators, tape dispensers, scissors, labelling machines, document holders and bar coding machines
- catering items costing $100 or less, including cutlery, saucers, cups, and table linen
- tradesperson's small hand tools costing $100 or less such as pliers, screwdrivers and hammers
- tools used by primary producers costing $100 or less including secateurs and pliers.