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Low-value pooling

Last updated 3 December 2005

You can allocate low-cost assets and low-value assets relating to your rental activity to a low-value pool. A low-cost asset is a depreciating asset whose cost at the end of the year in which it is first used, or installed ready for use, for a taxable purpose is less than $1,000 (after GST credits or adjustments). A low-value asset is a depreciating asset that is not a low-cost asset but:

  • which has an opening adjustable value of less than $1,000, and
  • for which you have worked out any available deductions for decline in value under the diminishing value method.

Once you choose to create a low-value pool and allocate a low-cost asset to it, 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.

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%.

The deduction for low-cost assets you allocate to the pool during the income year is worked out at a rate of 18.75%, 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.

When you allocate an asset to the pool, you must make a reasonable estimate of how much of your use of it is for producing assessable income (the asset's 'taxable use percentage'). Only the taxable use percentage of the asset's cost or opening adjustable value is written off through the low-value pool.

For further information about low-value pooling, including how to treat assets used only partly to produce assessable income and how to treat the disposal of assets from a low-value pool, refer to the Guide to depreciating assets.

If you are an individual who owns or has co-ownership of a rental property, you claim your low-value pool deduction for rental assets at TaxPack question D6 (not question 20 of the TaxPack supplement).

QC27452