Pooling an asset

You can add depreciating assets that have GST credits or adjustment costs, or have an adjustable opening value / written down value of less than $20,000 to a low-value pool and depreciate them at the relevant pool rate.

When first adding assets to the low-value pool, they depreciate at a rate of 18.75% for the current year. For subsequent years it's 37.5%

We'll calculate the decline in value of an asset that you hold jointly with others. It's based on the cost of your interest in the asset.

This means that you can allocate your interest in the asset to your low-value pool if:

• you hold an asset jointly

• the cost of your interest in the asset or the opening adjustable value of your interest is below $20,000.

When allocating an asset to the pool, estimate the private use percentage for:

• its effective life (for a low-cost asset)

• its effective remaining life at the start of the income year (for a low-value asset).

This percentage is for tax purposes to write-off the asset.

If you create a low-value pool and allocate a low-cost asset to it, you must pool all other low-cost assets that start in that income year and later years. This rule doesn't apply to low-value assets.

Simplified depreciation rules

You can choose to use the simplified depreciation rules if you're a small business entity with an aggregated turnover of less than:

• $10 million from 1 July 2016 onwards

• $2 million for previous income years.

See Simpler depreciation for small business on the ATO website for more information.

The simplified depreciation rules are an alternative way to the uniform capital allowances method of calculating depreciation.

If you use the simplified depreciation rules, you can add certain assets to a small business pool.

If you choose to use the simplified depreciation rules, you must apply them to all the assets that the rules apply to.

Accelerated depreciation rules

In March 2020, the ATO introduced an option for you to deduct the cost of depreciating assets at an accelerated rate. This is an incentive to businesses with an aggregated turnover of less than $500 million for the 2019–20 and 2020–21 income years.

If you choose to use the accelerated depreciation rate, the following rules will apply to the asset:

• The asset will be added to the general small business pool.

• In the year that you add the asset to the pool, depreciation will be deducted at 57.5%, rather than 15% of the business portion of the new asset.

• In later years, the asset will be depreciated as part of the general small business pool rules, at 30%.

To apply an accelerated depreciation rate

1. On the Assets page, click Taxation on the top right.

2. Select 2020 or 2021 from the Years filter option.

3. Click the ellipsis to the right of an eligible small business pool asset, and choose Apply accelerated rate.
   

   

   The rate and calculations displayed are updated.
   

   

To undo an accelerated depreciation rate

1. On the Assets page, click Taxation on the top right.

2. Select 2020 or 2021 from the Years filter option.

3. Click the ellipsis to the right of the asset, and choose Undo accelerated rate.
   

   

   The rate and calculations displayed are updated.

   

To apply Temporary full expensing (TFE)

FE will be applied for the SBE pool, as mandatory, if the asset is installed/used between 7:30 pm AEDT 6 October 2020 and 30 June 2022.

To apply TFE for an eligible new asset:

1. Add a new asset.

2. In the Taxation section, select Temporary full expensing.

In the Assets list, click the ellipsis and select Small business pool or Low value pool.

You can bulk-transfer multiple assets to another pool by selecting two or more assets in the listing and select Transfer to Small business pool or Transfer to Low value pool.

To undo a transfer to pool

In the Assets list, click the ellipsis and select Original asset class. This transfers the asset back to its original general asset class.