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A low-value pool is created when you first choose to allocate a low-cost or low-value asset to the pool.
When you allocate an asset to the pool, you must make a reasonable estimate of the percentage of your taxable use of the asset over its effective life (for a low-cost asset) or the effective life remaining at the start of the income year in which it was allocated to the pool (for a low-value asset). This percentage is known as the asset's taxable use percentage.
It is this taxable use percentage of the cost that is written off through the low-value pool.
Working out the taxable use percentage
Kate allocates a low-cost asset to a low-value pool. The asset has an effective life of 3 years. Kate intends to use the asset 90 per cent for taxable purposes in the first year, 80 per cent in the 2nd year and 70 per cent in the 3rd year. The taxable use percentage is the average of these estimates; that is, 80 per cent.
Once you have allocated an asset to the pool, you cannot vary your estimate of the taxable use percentage even if the actual use of the asset turns out to be different from your estimate.
Once you choose to create a low-value pool and a low-cost asset is allocated to the pool, you must pool all other low-cost assets you start to hold in that income year and in later income years. However, this rule does not apply to low-value assets. You can decide whether to allocate low-value assets to the pool on an asset-by-asset basis.
Once you have allocated an asset to the pool, it remains in the pool.
Last modified: 01 Jun 2005QC 27399