Increase in pooling value threshold for depreciation purposes

On 4 June 2015, the Income Tax (Maximum Pooling Value) Order 2015 (LI 2015/141) was released which increases the maximum allowed pooling value to $5,000 (previously $2,000).

The pool method is one of the three available methods for calculating a depreciation loss for an income year.  The method allows a taxpayer to group a number of assets together and depreciate the pooled assets as if they were a single asset, thereby reducing compliance costs. A pool is depreciated using the diminishing value method, at the lowest rate applying to any asset in the pool.

“Poolable property” is property acquired during the income year for no more than the maximum pooling value threshold.

The order came into force on 1 July 2015 and applies for the 2015/16 and later income years. This is the first increase in the pooling value threshold since the rules were introduced back in 1993 and is therefore a long overdue measure which will assist depreciation compliance in certain situations.

Some may also argue it’s about time to increase the low value asset threshold for immediate write-off from $500 as well. The New Zealand threshold pales into significance with respect to the recent Australian budget announcements whereby small businesses meeting certain turnover thresholds can immediately deduct assets with a cost of less than A$20,000.

July 2015 Tax Alert contents

Tax Alert - July 2015

CIR v Trustpower Ltd: Unfeasibility expenditure  

Bright-line test for sale of residential property - issues paper released

Currency conversions for branches – draft released

Tax avoidance: Inland Revenue sheds further light on their approach in practice

Take care when transferring funds from a UK pension plan

New tax bill – the start of the business transformation process

Increase in pooling value threshold for depreciation purposes