Things you need to know
You can claim a deduction for the decline in value of low-cost and low-value assets you used in the course of producing assessable income, by allocating them to what is called a low-value pool. Claims for a deduction for the decline in value of other depreciating assets are dealt with at other questions.
Low-cost assets are depreciating assets that cost less than $1,000.
Low-value assets are depreciating assets that are not low-cost assets but which, on 1 July 2023, had an opening adjustable value of less than $1,000 under the diminishing value method.
You can have only one low-value pool.
Once you choose to allocate a low-cost asset to the low-value pool, you must allocate to the pool all other low-cost assets you start to hold in that year and in future years. Once allocated, those assets must remain in the pool.
However, you can decide whether to allocate low-value assets to the low-value pool on an asset-by-asset basis.
What can be included
Assets you can allocate to a low-value pool include assets you use either:
- in your work as an employee (see questions D1 Work-related car expenses 2024 to D5 Other work-related expenses 2024)
- to gain rental income (see question 21 Rent 2024).
However, if you claim the deduction at this question, do not claim it at questions D1 to D5 or question 21.
What can't be included
The following cannot be included in a low-value pool:
- assets you have previously claimed deductions for using the prime cost method
- assets that cost $300 or less for which you can claim an immediate deduction
- assets for which you deduct amounts under the simplified depreciation rules for small business entities – for more information, see Business and professional items schedule instructions 2024
- horticultural plants
- a portable electronic device (such as a laptop, portable printer, personal digital assistant, calculator, mobile phone and portable GPS navigation receiver), computer software, protective clothing, a briefcase or a tool of trade, which is primarily for use in your employment, if your employer provided it, paid for it or reimbursed you for any of its cost, and the benefit was exempt from fringe benefits tax.
If your low-value pool contains only assets used in business, you should lodge your tax return using myTax or a registered tax agent.
If you are unable to use myTax or a registered tax agent, contact us and we will mail you a paper tax return and Business and professional items schedule.
If you did not allocate assets to a low-value pool in 2023–24 or in a previous year, go to question D7 Interest deductions 2024.
What you need to answer this question
When you allocate an asset to a low-value pool, you must make a reasonable estimate of the percentage you will use the asset to produce your assessable income over its effective life (for a low-cost asset) or remaining effective life (for a low-value asset). This estimate is called your taxable use percentage for the asset.
You work out your low-value pool deduction using a diminishing value rate. A rate of 37.5% is generally applied to the pool balance. However, a rate of 18.75% (that is, half the normal pool rate) is applied to the taxable use percentage of:
- the cost of each low-cost asset you allocated to the pool in 2023–24
- any additional capital costs (such as improvements) you incurred in 2023–24 for assets you allocated to the pool in an earlier income year and for low-value assets you allocated to the pool in 2023–24.
Completing your tax return
To complete this question, follow steps 1 and 2 below.
Step 1
Read example 1 and use Worksheet 1 to work out your total low-value pool deduction. Transfer the amount you worked out at worksheet 1 – row i to question D6 – label K.
Example 1: using worksheet 1 to work out your low-value pool deduction
Edward bought a printer for $600 in 2023–24. His employer did not pay or reimburse any of the cost of the printer. He decided to allocate it to a low-value pool. He estimated that over its effective life the printer would be used 40% of the time to produce his assessable income as an employee.
$600 × 40% is $240. Therefore, Edward will write $240 at worksheet 1 – row e.
This is the first year of Edward's low-value pool.
Edward previously claimed deductions under the diminishing value method for a laptop computer he had purchased for $1,500. His employer did not pay or reimburse any of the cost of the computer. The laptop's opening adjustable value on 1 July 2023 was $900.
Edward estimates that he will use it solely to produce his assessable income for its remaining effective life. Edward allocates the laptop to the pool in 2023–24 as it is now a low-value asset.
Edward's Worksheet 1 would look like this:
|
Row |
Low-value pool deduction |
Amount |
|---|---|---|
|
a |
The closing balance of the pool for 2022–23 |
$0 |
|
b |
For each low-value asset allocated to the pool in 2023–24, multiply its opening adjustable value (on 1 July 2023) by your taxable use percentage for the asset. |
$900 |
|
c |
Add rows a and b. |
$900 |
|
d |
Multiply row c by 0.375. |
$337 |
|
e |
For each low-cost asset allocated to the pool in 2023–24, multiply its cost (including additional capital costs incurred in 2023–24, such as improvements) by your taxable use percentage for the asset. |
$240 |
|
f |
For each:
for which you incurred additional capital costs (such as improvements) in 2023–24, multiply the costs by your taxable use percentage for the asset. |
$0 |
|
g |
Add rows e and f. |
$240 |
|
h |
Multiply row g by 0.1875. |
$45 |
|
i |
Add rows d and h. |
$382 |
The amount at row i is the total low-value pool deduction. Edward shows $382 at question D6 – label K in his tax return.
End of exampleThe amount at row i is the total low-value pool deduction.
Step 2
You will need the closing pool balance for 2023–24 to calculate your low-value pool deduction for 2024–25. Worksheet 2 will help you work out the closing balance.
Some common events, such as the sale or disposal of an asset in the low-value pool, or the asset's loss or destruction, result in a 'balancing adjustment event'. If there has been a balancing adjustment event for an asset in the pool, you must reduce the closing pool balance. To do this, you multiply the asset's termination value (generally any proceeds, including any insurance payout, from the event) by your taxable use percentage for the asset. Your closing pool balance is reduced by the amount that results from this calculation. There is space for you to include this amount in worksheet 2. If this amount is more than the closing pool balance, you reduce the closing pool balance to nil and include the excess amount at question 24 Other income in your tax return.
Keep a record of your 2023–24 closing pool balance for next year's tax return.
For more information, see Guide to depreciating assets 2024.
Read example 2, then use Worksheet 2 to work out your closing balance.
Example 2: using worksheet 2 to work out your closing pool balance
Following on from example 1 Edward works out his closing balance, using his worksheet 2:
|
Row |
Closing balance for 2023–24 |
Amount |
|---|---|---|
|
j |
Transfer amount from worksheet 1 – row a. |
$0 |
|
k |
Transfer amount from worksheet 1 – row b. |
$900 |
|
l |
Transfer amount from worksheet 1 – row e. |
$240 |
|
m |
Transfer amount from worksheet 1 – row f. |
$0 |
|
n |
Add rows j, k, l and m. |
$1140 |
|
o |
Transfer amount from worksheet 1 – row i. |
$382 |
|
p |
Subtract row o from row n. |
$758 |
|
q |
For each pool asset subject to a balancing adjustment event in 2023–24, multiply its termination value by your taxable use percentage for the asset (see Step 2 above). |
$0 |
|
r |
Subtract row q from row p. |
$758 |
End of example
The amount at row r is your closing pool balance for 2023–24. You will need it to calculate your low-value pool deduction for 2024–25.
Where to go next
- Go to question D7 Interest deductions 2024.
- Return to main menu Individual tax return instructions 2024.
- Go back to question D5 Other work-related expenses 2024.