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Low-value pool

Learn what assets can be allocated to a low-value pool and depreciated at a set annual rate.

Last updated 25 June 2025

You can calculate the depreciation of certain low-cost and low-value assets by allocating them to a low-value pool and depreciating them at a set annual rate.

Assets you can allocate to a low-value pool

A low-cost asset is one that costs less than $1,000 after deducting any GST credits you're entitled to claim.

A low-value asset is an asset that has depreciated over one or more years and now has a written-down value of less than $1,000, but only if you've previously worked out deductions for it using the diminishing value method.

Assets you can’t allocate to a low-value pool

You can't allocate the following assets to a low-value pool:

  • assets that cost $100 or less for which you can claim an immediate deduction
  • assets costing up to $300 used to earn income other than from a business (which can be immediately deducted)
  • assets for which you can claim deductions under the
  • assets for which you previously calculated depreciation using the
  • portable electronic devices (including laptops, portable printers, personal digital assistants, calculators, mobile phones and portable GPS navigation receivers), computer software, protective clothing, briefcases and tools of trade, if:
    • you provided the item to your employee, or
    • you paid for some or all of the cost of the item (or reimbursed your employee for it) and the provision, payment or reimbursement was exempt from fringe benefits tax
  • horticultural plants, including grapevines
  • certain assets you use to conduct research and development activities.

Starting a low-value pool and allocating assets to it

You start a low-value pool when you first choose to allocate a low-cost or low-value asset to it.

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, for your low-value assets, you can decide whether to allocate them to the pool on an asset-by-asset basis.

Once you've allocated an asset to the pool, it must remain there.

You are not required to allocate depreciating assets to a low-value pool. The choice is yours. If you choose not to use low-value pooling, you work out the decline in value of low-cost and low-value assets as you do your for the effective life of other depreciating assets.

Assets used only partly for taxable purposes

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.

You must make the estimate based on the asset's effective life (for a low-cost asset) or remaining effective life (for a low-value asset).

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

Example 1: pool depreciating asset used partly for taxable purposes

During 2020–21, John buys a printer for $990. John allocated low-cost assets to a low-value pool in 2019–20 so now he must allocate the printer to the pool because it is also a low-cost asset.

John 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% × $990 = $594.

End of example

Threshold rule

The threshold rule allows you to claim an immediate deduction for most business expenditure of $100 or less on buying tangible assets.

The rule is meant to help you save time because you don't need to decide whether each purchase is of a revenue nature (and so immediately deductible) or of a capital nature (usually written-off over time).

Purchases of a revenue nature normally mean that you expect the item to be consumed, damaged or lost within a short period of time while purchases of a capital nature generally result in the item or asset being used over a longer period.

If you:

  • are using the simplified depreciation rules, you won't generally use the threshold rule for items of $100 or less as you can use the instant asset write-off
  • aren't using the simplified depreciation rules and you spend $100 or less (including GST) to acquire a tangible asset you can assume it to be of a revenue nature.

The $100 threshold rule includes GST in the price of the item. There's no need to separately identify any GST applicable to individual items (see Division 27 of the Income Tax Assessment Act 1997 (ITAA 1997).

Some examples of low-cost items that fall within the threshold rule, subject to the qualifications list, are:

  • office equipment costing $100 or less, such as handheld staplers, hole punches, manila folders, ring binders, geometry sets, stencils, calculators, tape dispensers, scissors, labelling machines, document holders and bar coding machines
  • catering items costing $100 or less, such as cutlery, saucers, cups, and table linen
  • tradesperson's small hand tools costing $100 or less, such as pliers, screwdrivers and hammers
  • tools used by primary producers costing $100 or less, such as secateurs and pliers.

Example: small business

A small cafe owner, who doesn't maintain an asset register or use the simplified depreciation rules, purchases spoons, coffee cups, espresso glasses and saucers every few months to maintain constant levels of stock, as these items are damaged or stolen. The owner spends around $60 every 3 or 4 months for these small items and claims the whole expense as a deduction in that income year.

Example: large business

A large mining business with an asset register buys a large quantity of small items each year to use in various sections of the enterprise. The items range from goggles and torches to small hand tools. These items cost $100 or less and are not recorded on the asset register. The items are claimed as business deductions in the year of purchase.

End of example

The threshold rule doesn't change your record-keeping requirements. You must continue to keep all relevant records as required under income tax and other taxation laws.

Sampling rule

If you purchase a large number of items for your business and use a low-value pool, you may be able to use the sampling rule to estimate how much of your purchases you can claim as an immediate deduction and how much you must depreciate over time.

The sampling rule saves you time because you don't need to decide whether each purchase is of a revenue nature (and thus immediately deductible) or of a capital nature (which must be written off over time).

Calculating the depreciation

You calculate the depreciation of all the assets in the low-value pool at the annual rate of 37.5%.

If you acquire an asset and allocate it to the pool during an income year, you calculate its deduction at a rate of 18.75% (that is, half the pool rate) in that first year. This rate applies regardless of at what point during the year you allocate the asset to the pool.

To work out the decline in value of the depreciating assets in a low-value pool, add:

  • 18.75% of both
    • the taxable use percentage of the cost of low-cost assets you allocated to the pool during the year
    • the taxable use percentage of the cost of any improvements you made during the year to the assets in the pool.
  • 37.5% of both
    • the closing pool balance for the previous year
    • the taxable use percentage of the opening adjustable values of any low-value assets allocated to the pool during the year.

Example 2: work out deduction for pooled asset

Using the facts of the previous example, assume at the end of 2019–20 John has a low-value pool with a closing balance of $5,000. John's deduction for the assets in the pool for 2020–21 is:

Description

Value

18.75% of the taxable use percentage of the cost of the printer allocated to the pool during the year (18.75% × $594)

$111

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

$1,875

Total

$1,986

 

End of example

Disposal of a pooled depreciating asset

If you dispose of a pooled asset during an income year you must reduce the closing pool balance for the year by the taxable use percentage of the asset's termination value (for example, any proceeds from the disposal).

If there's a difference between the asset's cost and its termination value, the non-taxable proportion of this difference is treated as a capital gain or loss.

If the termination value is larger than the closing pool balance, the excess amount is also included in your assessable income.

Example 3: disposal of pooled depreciating asset

Following on from the first example, during 2021–22, John sells the printer for $500. Because he originally estimated that the printer would only be used 60% for taxable purposes, the closing balance of the pool is reduced by 60% of the termination value, that is 60% × $500 = $300.

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

End of example

Working out the closing pool balance

The closing balance of a low-value pool is the closing pool balance for the previous income year:

  • plus the taxable use percentage of the costs of any low-cost assets, opening adjustable values of low-value assets and cost of any improvements made to the assets in the pool
  • minus the deduction for the decline in value of the depreciating assets in the pool and the taxable use percentage of the termination value of any pooled assets disposed of.

Example: working out the closing pool balance

Assuming that John made no additional acquisitions to or disposals from his low-value pool, the closing balance of his pool for 2001–02 and 2002–03 is:

Closing pool balance 2020–21

Item

Amount

Closing pool balance for 2019–20

 

$5,000

Plus taxable use percentage of low-cost assets allocated for the year (see example 1)

New printer

$594

Less decline in value of assets in pool for the year (see example 2)

 

− $1,986

Closing pool balance for 2020–21

 

$3,608

 

Closing pool balance 2021–22

Item

Amount

Closing pool balance for 2020–21

 

$3,608

Less decline in value of assets in pool for the year

37.5% × $3,608

− $1,353

Less taxable use percentage of termination value of pooled assets that were disposed of during the year (see example 3)

 

− $300

Closing pool balance for 2021–22

 

$1,955

 

End of example

How this applies to primary producers

You can only claim a deduction for primary production activities under the low-value pooling provisions if the assets can't be deducted under the primary producer provisions.

Where you're using a low-value pool and need to separate your deductions into primary production and non-primary production activities, you must apportion your deduction for the low-value pool on a reasonable basis. One way to do this is to keep records as if the deductions to be separated and the assets the deductions relate to were in a separate pool.

Understand for the sampling rule applies to low-cost assets.

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