• Balancing adjustment event for a depreciating asset 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

    If a balancing adjustment event occurs for a depreciating asset in a low-value pool, the amount of the closing pool balance for that year is reduced by the taxable use percentage of the asset's termination value. If that amount exceeds the closing pool balance, reduce the closing pool balance to zero and include the excess in assessable income.

    A capital gain or capital loss may also arise if the asset is not used wholly for a taxable purpose. The difference between the asset's cost and its termination value that is attributable to the estimated non-taxable use of the asset is treated as a capital gain or capital loss.

    To help you work out your deductions for depreciating assets in a low-value pool, a worksheet is provided.

    Example

    Disposal of a depreciating asset in a low-value pool (ignoring any GST impact)

    Following on from the previous examples, during the 2002-03 income year John sells the printer for $500. Because he originally estimated that the printer would only be used 60 per cent for taxable purposes, the closing balance of the pool is reduced by 60 per cent of the termination value of $500; that is $300.

    A capital loss of $196 also arises. As the printer's taxable use percentage is 60 per cent, 40 per cent of the difference between the asset's cost ($990) and its termination value ($500) is treated as a capital loss.

    Assuming that John made no additional allocations to or reductions from his low-value pool, the closing balance of the pool for the 2002-03 income year is $1,955:

    Closing pool balance for the 2001-02 income year

    $3,608

    less the decline in value of the assets in the pool for the year (37.5% x $3608)

    ($1,353)

    less the taxable use percentage of the termination value of pooled assets that were disposed of during the year

    ($300)

    Last modified: 01 Jun 2005QC 27399