Claiming Low Value Pool Depreciation

(last updated 26/03/2014)

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Work related tools and equipment costing between $300 and $1000 can be allocated to a Low Value Pool depreciated under. Tools and equipment that have declined in value from other depreciation methods can also be allocated to the Low Value Pool. See this post for a checklist on eTax and Allowable Deductions.

Working out Depreciation

You work out your 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 in which you first allocate one or more low-cost assets to a low-value pool, you work out your deduction at a rate of 18.75%, or half the normal pool rate. Halving the rate recognises that assets may be allocated to the pool throughout the income year and eliminates the need for separate calculations for each asset based on the date it is allocated to the pool.
Once you choose to allocate a low-cost asset to a low-value pool, all low-cost assets you start to hold in that and any subsequent income year must also be allocated to the pool.

Why use Low Value Pool

Low Value Pool method of depreciating tools and equipment will almost always result in a larger deduction for two reasons:
The Low Value Pool rate is higher than most depreciation rates - even in the first year;

  • Under other depreciation methods the claim amount is based on an apportionment for the number of days through the year it was held, often resulting in a relatively low small deduction.

    Assets that can not be allocated to a Low Value Pool

    You cannot allocate the following depreciating assets to a low-value pool:
    • assets for which you have previously claimed deductions worked out 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 (see note below), and
    • horticultural plants.

  • For help with your eTax return see our eTax Return Checklist.

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