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Not all assets are born or (bought) equal. And they are certainly not treated as such when it comes to dealing with them in terms of tax deductions and depreciation. Those with low cost, or low tax value are often grouped together in a low-value pool to allow for a single deduction instead of a myriad of small ones. Baxton Property Management looks at how this works.
Let’s say that you bought and installed a bar fridge in your investment property, to create extra rental income. At the end of the first year that you bought and installed it, it’s worth less than $1000. This is classified as a low-cost asset.
The original cost does not determine whether or not a depreciating asset is classified as low-value for tax purposes. This term applies to assets that have been depreciating for some years and whose book value has dropped to less than $1000 as at the middle of the income generating year.
The tax man, in his infinite wisdom, has decided that you can group your low-cost and low-value assets into what is called a low-value pool. This means that you only make one calculation for depreciation of the entire pool of assets, and not have to do one for each individual asset. It therefore provides you with one deduction amount for all of them that you can use as a claim against the rental income it has been used to help generate.
There are, however, certain conditions attached to assigning low-cost and low-value assets to a low-value pool.
Baxton, as quality rental property managers, will assist you in running your rental property as efficiently as possible. We will also keep you informed on all issues that are relevant to rental properties, owners, investors and their tenants. Browse our informative blogs on the Baxton website.
Written and syndicated by
– Baxton Media.
We hope you enjoyed this article
The information contained in this article is based on the authors opinion only and is of a general nature which is not indicative of future results or events and does not consider your personal situation or particular needs. Professional advice should always be sought relevant to your circumstances.
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