• How do you pool depreciating assets used only partly for taxable purposes?

    When you first allocate a depreciating asset to a low-value 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 its remaining effective life (for a low-value asset). You only allocate to the pool the percentage of the asset's cost (for a low-cost asset) or adjustable value (for a low-value asset) that relates to the use of the asset for a taxable purpose, such as producing assessable income. This percentage is known as the asset's taxable use percentage.

    The cost or opening adjustable value of an asset must be less than $1,000 before taking into account the asset's taxable use percentage for the asset to be allocated to a low-value pool.

    Once you have allocated an asset to the pool, you cannot vary your estimate of the taxable use percentage, even if the actual taxable use of the asset turns out to be different to your estimate.

    Example 1

    During 2001-02, John buys a printer for $990. John allocated low-cost assets to a low-value pool in 2000-01 so now he must allocate the printer to the pool because it is also a low-cost asset. He estimates that only 60% of its use will be for taxable purposes. Therefore, he would allocate only 60% of the cost of the printer to the pool, that is:

    60% x $990 = $594

    End of example
      Last modified: 15 Apr 2016QC 16455