Tremain Chris: Taxation (Depreciation Payment Dates Alignment FBT and Miscellaneous Provisions) Bill — Instruction to Committee In Committee 
Tremain Chris: Taxation (Depreciation Payment Dates Alignment FBT and Miscellaneous Provisions) Bill — Instruction to Committee In Committee 
[Volume:630;Page:2021] 
CHRIS TREMAIN (National—Napier) 
: 
 I will just finish where I got to prior to the call on the serious issues of changes to the low-value asset threshold. 
Rt Hon Winston Peters 
: I raise a point of order Mr Chairperson. I know that in recent years National has got pretty lax on the issues of protocol and the Standing Orders but to make sure that the new member does not fall into the same mistake he should be asked to address the person he is talking about properly not just carry on. 
The CHAIRPERSON (H V Ross Robertson) 
: The member had a throw-away line and I drew it to his attention that it was improper to refer to a person by just his or her first name. The member must address the member by his full name if calling him. 
Dr the Hon Lockwood Smith 
: I raise a point of order Mr Chairperson. I must not allow my colleague to carry the rap for a breach that I made. I apologise to the House but it was me who called out that Winston had run out of puff; it was not my colleague. I apologise for that. 
The CHAIRPERSON (H V Ross Robertson) 
: Thank you Dr Smith. I am sorry. 
CHRIS TREMAIN 
: I will address a couple of closing remarks to the Minister particularly in terms of the changes to the low-value thresholds which are addressed in clause 56. The bill proposes an immediate deduction for capital expenditure up to $500. I previously said I was in favour of that even though many submitters to the select committee proposed that it be higher than $500. But in saying that it is good legislation and it gives businesses the ability to write off assets at that lower level and I think that is excellent. 
The last thing I will address tonight is assets that reduce below the $500 threshold. What I am talking about here are assets that initially come into the books at say $2000. A good example may be a computer. With a 40 percent depreciation rate that will very quickly be down below the $500 level. The ability to write off that asset once it gets below a $500 value is an issue we raised a number of times in the select committee. Under a diminishing value system there is a situation where the value of the asset goes on and on and remains in the fixed asset register for many years. 
We initially proposed that that fixed asset would be able to be written off once it had dropped below the $500 level but it was very clear from Robin Oliver and his team that that would have a huge fiscal implication if it was immediately written off when it got under the $500 level. In saying that National believes that there needs to be a threshold at which assets can be written off. Tonight Dr Lockwood Smith is proposing a level—and I will speak to that in a minute—that is significantly below that. 
I speak as a businessperson who has had businesses throughout his life— 
Rt Hon Winston Peters 
: Like what? 
CHRIS TREMAIN 
: I will tell the member exactly what I will talk about. There are a number of businesses that I own— 
Dr the Hon Lockwood Smith 
: He is asking about the threshold of $10. 
CHRIS TREMAIN 
: The threshold that we will propose is $10 which is significantly down below $500. 
When one owns a business year after year the assets on the fixed asset register continue to depreciate to the point where one does not have a clue where many of them remain in one’s business. The compliance cost of checking to see whether those assets remain in one’s business is huge. It can take many hours to go around and check whether assets remain on the register particularly for small businesses. 
So we are proposing tonight that there be a threshold put in place that would allow assets once they got down below that bottom level to be able to be written off immediately so that we do not continue to carry along assets in the register at $2 $4 and $6—ridiculous levels. In fact I would prefer it to be higher but we are trying to be practical with the recommendation. So members will see that in new clause 56B to insert after clause 56: “Assets with very low tax values … (1C) This section applies when a person in an income year has an item of depreciable property that has an adjusted tax value at the start of the income year of $10 or less.” We believe that would reduce compliance cost get it off the asset register and move it on.