What does low-value pooling mean?
Low-value pooling is one of the depreciating methods that Koste uses to prepare the tax depreciation reports and has been around since 1st July 2000. To be technical we utilise the Income Tax Act 1997 provision set out in Subdivision 40-E.
The low-value pool contains both Low-Cost assets and Low-Value assets, now what is the difference?
Low-cost assets are assets which are acquired and have a total cost of less than <$1,000.
In the year a low-cost asset is depreciated at 18.75% on the diminishing value basis. This rate is applicable for the first year only increasing to 37.5% in the second year onwards. The reason the rate is lower in the first year is it is an average apportioned over the number of days owned in that year.
Please note that thepool is always depreciated on a diminishing value basis. Once you decide to move teh asset into the low value pool it stays there.
A taxpayer can choose whether or not to put low-cost assets into a low-value pool. However, if in an income year (tax year) they choose to do so, then all other low-cost assets acquired from that year onwards must also be put into the low-value pool.
In Fact, it will not always be in the client’s best interests to choose to use a low-value pool for their low-cost assets. For example, if a refurbishment is planned for 2 years’ time, it may be prudent to depreciate the assets outside of the pool as assets within the pool cannot be written-off on demolition or destruction.
Where the depreciation method you are using is diminishing value, you may also add assets to the low-value pool at the beginning of a tax year if their opening adjustable values (written down values) fall below $1,000.
These are known as low-value assets. From that year onwards, the taxpayer can put the asset into the low-value pool and it will be depreciated at 37.5% on the diminishing value basis from then on.
A taxpayer can choose on an asset-by-asset basis whether or not to put low-value assets into the low-value pool. It does not matter when the asset was originally acquired.
David brought a workstation for his small business on 1 July 2020 for $1,250. He is planning to depreciates it on the diminishing value method with an effective life of 7 years.
|Year 1||Year 2|
Where are the property investors?
- Queensland 24% 24%
- New South Wales 30% 30%
- South Australia 7% 7%
- NT 1% 1%
- West Australia 11% 11%
- Tasmania 2% 2%
- Victoria 23% 23%
Unsure what you need?
Other people viewing…
Australians are now holidaying at home, and many investors are now looking at benefits of owning a holiday let over renting on a permanent basis. But what does this mean for depreciation deductions?You first need to look at whether you will be renting the full or part...
Depreciation is a tax deduction claimable for the natural wear and tear of your building and assets over time, as they get older. The Australian Taxation Office (ATO) allows owners of income producing properties to claim this depreciation as a tax deduction. Unlike...
Hi Mark Kilroy, here bringing our clients and partners August monthly update from the marina here in Cairns. It's been a challenging few months for most of the country. We've locked downs. This tax season needs one. We're going to remember for a long time, despite the...