• 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 you allocate an asset 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.

    You work out the deduction for the decline in value of depreciating assets in a low-value pool using a diminishing value rate of 37.5%.

    For the income year you allocate a low-cost asset to the pool you work out its decline in value 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. This 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% 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 for the income year of:
      • all assets in the pool at the end of the previous income year, and
      • low-value assets allocated to the pool for the income year,
       

    and

    • 37.5% 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 2005-06 income year, John bought a printer for $990. John allocated low-cost assets to a low-value pool in the 2004-05 income year so he had to allocate the printer to the pool because it too was a low-cost asset. He estimated that only 60% of its use would be for taxable purposes. He therefore allocated only 60% of the cost of the printer to the pool - that is, $594.

    Assume that at the end of the 2004-05 income year, John had a low-value pool with a closing pool balance of $5,000. John's deduction for the decline in value of the assets in the pool for the 2005-06 income year would be $1,986. This is worked out as follows:

    18.75% 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% of the closing pool balance for the previous year (37.5% x $5,000)

    $1,875

    The closing balance of a low-value pool for an income year 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 for the income year of:
      • assets in the pool at the end of the previous income year, and
      • low-value assets allocated for the income 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 2005-06 income year would be $3,608:

    Closing pool balance for the 2004-05 income year

    $5,000

    plus the taxable use percentage of the cost of the printer

    $594

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

    ($1,986)

    Last modified: 18 Jul 2006QC 27742