• Working out the decline in value of depreciating assets in a low-value pool

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    Once an asset is allocated to a low-value pool, it is not necessary to work out its adjustable value or decline in value separately. Only one annual calculation for the decline in value for all of the depreciating assets in the pool is required.

    The deduction for the decline in value of depreciating assets in a low-value pool is worked out using a diminishing value rate of 37.5 per cent.

    The deduction for low-cost assets you allocate to the pool for the income year is worked out at a rate of 18.75 per cent or half the pool rate. Halving the rate recognises that assets may be allocated to the pool throughout the income year and eliminates the need to make separate calculations for each asset based on the date it was allocated to the pool.

    To work out the decline in value of the depreciating assets in a low-value pool, add:

    • 18.75 per cent of:
      • -the taxable use percentage of the cost of low-cost assets you have allocated to the pool for the income year and
      • -the taxable use percentage of any amounts included in the second element of cost of all assets in the pool at the end of the previous year and of low-value assets allocated to the pool for the current year
       

    and

    • 37.5 per cent of:
      • the closing pool balance for the previous income year and
      • the taxable use percentage of the opening adjustable value of any low-value assets allocated to the pool for the income year.
       

    Example

    Working out the decline in value of depreciating assets in a low-value pool (ignoring any GST impact)

    During the 2001-02 income year, John bought a printer for $990. John allocated low-cost assets to a low-value pool in the 2000-01 income year so now he must allocate the printer to the pool because it too is a low-cost asset. He estimates that only 60 per cent of its use will be for taxable purposes. He, therefore, allocates only 60 per cent of the cost of the printer to the pool; that is, $594.

    Assume that at the end of the 2000-01 income year, John had a low-value pool with a closing pool balance of $5000. John's deduction for the decline in value of the assets in the pool for the 2001-02 income year would be $1986. This is worked out as follows:

    18.75 per cent of the taxable use percentage of the cost of the printer allocated to the pool during the year
    (18.75% x $594)

    $111

    plus 37.5 per cent of the closing pool balance for the previous year
    (37.5% x $5,000)

    $1,875

    The closing balance of a low-value pool is:

    • the closing pool balance for the previous income year plus
    • the taxable use percentage of the cost of any low-cost assets allocated to the pool for the income year plus
    • the taxable use percentage of the opening adjustable value of low-value assets allocated to the pool for the income year plus
    • the taxable use percentage of any amounts included in the second element of cost of assets in the pool for the income year (these would be all assets in the pool at the end of the previous year and low-value assets allocated for this year) less
    • the decline in value of the assets in the pool for the income year.

    Example

    Working out the closing balance of a low-value pool (ignoring any GST impact)

    Following on from the previous example, assuming that John made no additional allocations to or reductions from his low-value pool, the closing balance of the pool for the 2001-02 income year would be $3608:

    Closing pool balance for the 2000-01 income year

    $5,000

    plus the taxable use percentage of low-cost assets allocated for the year (new printer)

    $594

    less the decline in value of the assets in the pool for the year

    ($1,986)

    Last modified: 01 Jun 2005QC 27399