Sampling rule
The sampling rule allows you to use a sample of your business purchases to estimate how much you can claim as an immediate deduction, and how much you must depreciate over time.
The rule is meant to help you save time as you don't need to decide whether each purchase is of a revenue nature (and so immediately deductible) or of a capital nature (usually written-off over time).
Purchases of a revenue nature normally mean you expect the item to be consumed, damaged or lost within a short period of time. Purchases of a capital nature generally result in the item or asset being used over a longer period.
Who can use the sampling rule
Businesses can use the sampling rule if they both:
- have a low-value pool
- don't have systems that result in reliable individual identification and accounting of low cost items.
How the sampling rule works
A business with a low-value pool under Subdivision 40-E of the Income Tax Assessment Act 1997 (ITAA 1997) 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 both:
- purchases of items costing less than $1,000
- not excluded by the general qualifications set out later in this fact sheet.
Items costing less than $1,000 are eligible as they'll 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, 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).