• Pooling and depreciating assets costing more than the threshold

    If the cost of the asset is the same as or more than the instant asset write-off threshold, the asset must be placed into the small business pool.

    The small business pool is a list of all your depreciable assets with their current written down values.

    Any depreciating assets for which you can't claim an immediate write-off are allocated to the small business pool. This includes assets that:

    • cost the same as or more than the instant asset write-off amount
    • you held before you used the simplified depreciation rules (other than excluded assets).

    You claim a 15% deduction for assets in the year you buy them (regardless of when the asset was purchased during the year) and a 30% depreciation deduction in subsequent years.

    Low pool value – instant asset write-off

    If the balance of the small business pool after the following adjustments is less than the instant asset write-off threshold you must write-off the pool balance, and you claim the amount as a depreciation deduction, using the following steps:

    1. Opening balance for the current year
    2. Add: Adjustable value of assets you acquired and started to use in the current year
    3. Add: Taxable proportion of additions to the pool in the current year
    4. Less: Taxable purpose proportion of proceeds (including insurance payouts) of any assets disposed of in the current year.

    If the pool value is less than the instant asset write-off threshold, the pool depreciates by this amount and its closing balance for the year becomes zero.

    Example: Pool balance under the instant asset write-off threshold

    On 1 January 2015, Levi’s Pet Washing purchased a fitted-out van for the mobile pet washing business for $20,000. The van was purchased 100% for the business, which didn’t have any other assets in its small business pool.

    As the cost of the van was over the $1,000 instant asset threshold (applying at that time), the business claimed a deduction for 15 per cent of the cost ($3,000) in its 2014-15 income tax return, with the remaining cost ($17,000) being deductible in later income years under the pooling rules.

    The business didn’t make any further purchases during the 2015­16 income year and the balance of the pool at the end of that year remained at $17,000.

    In its 2015-16 income tax return, Levi’s Pet Washing claimed a deduction of $17,000 for the balance of the small business pool, as the balance at the end of the year was below the $20,000 threshold that applied for that year.

    End of example
      Last modified: 05 Jul 2016QC 21100