How does the sampling rule work?

Under Subdivision 40-E of the Income Tax Assessment Act 1997 (ITAA 1997) a business with a low-value pool may use statistical sampling to determine the proportion of the total purchases on low-cost tangible assets that are revenue expenditure.

The purchases eligible for sampling are those that are:

  • purchases of items costing less than $1,000, and
  • not excluded by the general qualifications set out later in this document.

Items costing less than $1,000 are eligible as they will be allocated to the low-value pool if the expenditure on them is capital and they are depreciating assets. Accordingly, items costing $1,000 or more must be excluded for the purposes of the sampling calculations.

The 'cost' for these purposes is the cost worked out under Division 40 of the ITAA 1997, as that is the amount relevant for the purposes of the low-value pool. Input tax credits and decreasing adjustments under GST are normally excluded (see Division 27 of the ITAA 1997).

    Last modified: 13 Dec 2005QC 17150