Uniform Capital Allowance & Pooling Methods

The Uniform Capital Allowance method applies to entities and assets that are not eligible or who choose not to use the Simplified Depreciation Rules. Refer to the link below for the Simplified Depreciation Rules.

Business Assets (Excluding In-house Software & Blackhole Expenditure) 

Assets subject to a depreciating asset lease (including long-term Rental Properties) 

This applies to income other than business income (including employee - provided tools and equipment)

NB! For jointly owned assets the thresholds apply to each individual taxpayer’s share of the asset.

If you dispose of an asset in the ‘Low Value’ pool the proceeds reduces the running balance of that pool.  The proceeds are not assessable income unless they exceed the balance in that entire pool.  However if you dispose of an asset for which you have claimed an immediate tax deduction the proceeds are assessable.

For both business and non-business assets, you can transfer low value assets (i.e. those with ‘Written Down Value’ of less than $1,000) to the ‘Low Value Pool’ if they were not previously depreciated using the ‘Prime Cost Method’.

If the taxpayer has only transferred low value assets to the low value pool, but has never allocated a low cost asset to the low value pool, they can still elect to use the Uniform Capital Allowance Method for new assets purchased. 

(1)   Low Value Pools - Warning!
Establishing a low value pool is optional. However, once a taxpayer elects to allocate a low cost asset to a low value pool for any income year all low cost assets acquired in that year and subsequent years must be allocated to that pool.  Tip! – Ensure your tax depreciation software can handle pooling efficiently, especially in relation to jointly owned assets and also retention of information rolled forward to future years.

The low value pool uses the diminishing value method.  Unlike the effective life method, the written down values of individual assets are not kept track of.  When an asset is scrapped no adjustment is made to the pool’s written down value.  Therefore even after all the assets in the pool have been scrapped, the pool could continue for many years.  This method is not consistent with generally accepted accounting practice which requires assets to be written off when they no longer exist. 

(2) In-House Software & Blackhole expenditure
The above rates do not apply to expenditure incurred on in-house software and blackhole expenditure.  Also, special rules apply to some Film Copyright expenditure.  Refer to the links below for more details.

For eligible assets acquired before 10 May 2006, diminishing value depreciation is applied at the rate of 150%.

For eligible assets acquired on or after the 10 May 2006, diminishing vale depreciation is applied at the rate of 200%.

NB! The new rate for diminishing value does not apply to:

> Assets allocated to a low value pool. The rate of 37.5% still applies.

> Intellectual property assets (excl. film copyright).

> In-house software.