The ATO and IRD both allow the pooling of fixed assets for depreciation for tax purposes.
Put simply, fixed assets with a book value below a certain threshold can be aggregated - pooled and depreciated until they are written off.
To set up the Low Value Pool (also known as the LVP), go to Register Settings > Pools:
Once this is done, you will be able to Transfer assets into the Low Value Pool (LVP):
How Low Value Pool (LVP) calculations work in AssetAccountant:
When an asset is added to the Low Value Pool, its balance now belongs to the LVP.
If an asset is later disposed, the balance of the asset's value still belongs to the LVP.
So, in a simple example, if a $1000 asset is added to the pool in some financial year and then disposed (for $0, say) on the same day, there is still $1000 in the pool to depreciate.
This is also the case where all assets in a pool are disposed of.
- AssetAccountant follows the legislation for how the Low Value Pool is treated. The ATO has a good guide here: https://www.ato.gov.au/Forms/Guide-to-depreciating-assets-2022.
- Calculations are very precise and in Australia for example, take account of the 18.75% / 37.5% variance in the first year allowable by the ATO.
- This also allows the LVP to be reported separately to the other assets in your register.
- If an asset is allocated to the LVP in the year of acquisition, it (or at least the proportion of the pool value allocated to it) depreciates at 18.75% in the first year, then 37.5% in each year thereafter. This should always be the case, regardless of when the asset was acquired. For example, a sub $1000 value asset acquired on 1 July 2022 and allocated to the pool should depreciate at the same rate as one acquired on 30 June 2023.
- If the asset is transferred to the LVP in some subsequent year (eg where it falls below $1000 in value), it depreciates at 37.5% in each year.
- If the asset is disposed from the LVP, this creates a balancing adjustment against the pool, it doesn't really remove the asset from the pool. So, for example, if you had an LVP with 1x $1000 asset in it and you wrote the asset off for $0, the pool would continue to have a balance and depreciate accordingly.
There's a process for making LVP calculations at the end of the year which involves acquisitions, transfers and disposals during the year .
This tends to mean that you only know the LVP depreciation amount for the year on the last day of the year.
For this reason AssetAccountant will calculate LVP depreciation on the last day of the year and can't apportion it to monthly or quarterly reporting because not all the facts aren't all known until the end of the year.
Can assets be imported directly to pools?
Yes, your assets can be imported directly into pools using the Advanced Import Assets feature:
Finally, there's a great overview of pools functionality in this video: