How to Claim Low-Value Pooling

Immediately Write Off $300 and Low-Value Pooling

(NOTE: Deductions for these plant and equipment items may only apply if you bought the property prior to May 9, 2017 – Read about the Budget changes here).

Depreciation deductions are pro-rated depending on when you take ownership of a property. However, like with everything, there are exceptions to the rule.

For example:

claim low value pooling
A Sydney client of ours settled on a one-bedroom Chatswood unit on June 25th last year. The property was built in 1999 and the purchase price was $450,000. Yet, their total tax deduction, which was for five days only, was more than $5,000.

“What’s the catch?” I hear you ask. Well, there isn’t one! The ability to make such a significant deduction for just a short period of time is due to the immediate write-off and low-pooling of items that are classified as plant and equipment.

The costs of ‘small items’ (valued at $300 or below) and ‘low-pooled items’ (totalling no more than $1,000) should not be pro-rated, instead they can be written off immediately. You can maximise these items whether the property has been owned for 1 day or 365 days. And the age of the property is not relevant to claiming small items or low-value pooled items. Plant and equipment in properties of any age are eligible for depreciation allowances.

There is a saying that goes, “a dollar today is worth more than a dollar tomorrow”, so deduct these items as quickly as possible.Depreciation Quote Schedule

What if you are a joint owner of a property?

For example:

Say an electric motor to the garage door cost the owners of an apartment block $2,000. If there are 50 units in the block, your portion is $40. You
can claim that $40 outright as your portion is under $300. Provided your portion for any joint area is under $300, you can still write it off in your taxes.

Items that depreciation faster:

Another tip is to buy items that depreciate faster. Items costing between $300 and $1,000 fall into the low-pool category and attract a higher depreciation rate. A $1,200 television attracts a 20% deduction while a $950 TV deducts at 37.5% per annum.

Work out how much you save using our free property depreciation calculator or make it happen and get a free quote for a depreciation schedule now.

Looking Into The Future of Depreciation

What does the future of depreciation look like?

*UPDATE – Read about the Budget changes here*.

Often I’m asked by investors who are about to purchase an investment property “what should I look for in order to maximise my future depreciation claim?”

People seem surprised when I respond by saying whilst depreciation is an important part of the property investment equation, I recommend that it should not be part of your initial decision-making process.

future of depreciation

Prospective investors should first be asking questions like:

Where will I get the most capital growth? What’s the yield of the property? What’s the population growth of the suburb?

Once you’re satisfied on these fronts, THEN consider how to make depreciation work for you.

Here are four things to consider to increase the return on your investment property for the future:

  1. Carpet and floating floors will depreciate at a greater rate than, say, a tiled floor which is only depreciable at 2.5% per annum.
  2. Blinds and light fittings are highly depreciable and can often be written off immediately.
  3. Split-system air conditioning systems provide higher depreciation compared to ducted ones. As the ducting itself is part of the building and only claimable at 2.5% per annum.
  4. If built after 1987, can claim the building allowance component significantly increasing your claim. Depreciation Quote Schedule