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:
- Opening balance for the current year
- Add: Adjustable value of assets you acquired and started to use in the current year
- Add: Taxable proportion of additions to the pool in the current year
- 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