Not every purchase can be written off in one go. For lower cost items that miss out on an immediate deduction, the low-value pool can keep your depreciation simple.
What counts as low value
The ATO says a low-cost asset is one that costs less than $1,000, after taking off any GST credits you can claim. Think of a small tool, a printer or a piece of office furniture. Items that cost $1,000 or more generally follow normal depreciation rules instead.
How the pool works
- Put the assets in one pool. Instead of tracking each item, you track a single balance.
- The first year rate is lower. The ATO says assets you add during the year are depreciated at 18.75%.
- Later years use 37.5%. The pool balance is depreciated at a diminishing value rate of 37.5% each year.
When it does not apply
The ATO says assets you claim under the simplified depreciation rules for small business cannot also go into a low-value pool. If you use simplified depreciation, ask your accountant which pool your cheaper items belong in. Also check whether an item qualifies for an immediate deduction first, because that may be the better option.
What to do
- Keep a simple asset list. Record the date, cost and GST credit for each purchase.
- Check your depreciation method before you allocate assets to a pool.
- Keep your invoices. You need them to support what went into the pool.
- Ask before year end. Choices about assets are easiest to make before 30 June.
This tip is general information only and does not take your circumstances into account.