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ATO Interpretative Decision

ATO ID 2004/115 (Withdrawn)

Income Tax
Capital Allowances: low-value pools - cost threshold - initial private use

Attention This ATO ID is withdrawn. Guidance on this issue can be found in Guide to depreciating assets 2016 (NAT 1996, PDF 623KB) and in Rental properties (NAT 1729, 520KB).
Attention This document has changed over time. View its history.
FOI status: may be released
Status of this decision: Decision withdrawn 5 May 2017.

CautionCAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.


Is a depreciating asset with a cost of less than $1,000, that is now being used for a taxable purpose but which was first used for a non-taxable purpose, a low-cost asset that can be allocated to low-value pool under section 40-425 of the Income Tax Assessment Act 1997 (ITAA 1997)?


Yes. As the cost of the depreciating asset is less than $1,000 when it is first used for a taxable purpose, it is a low-cost asset that can be allocated to a low-value pool under section 40-425 of the ITAA 1997.


A taxpayer acquired a property that would be rented out after it was renovated. In the meantime, it served as the taxpayer's private residence.

In the 2001-02 income year, while the taxpayer used the house as a private residence, the existing carpet in one room was replaced with new carpet, at a cost of $800.

The house was placed on the rental market in the 2002-03 income year and used for a taxable purpose during that period.

Reasons for Decision

Under subsection 40-425(1) of the ITAA 1997, a taxpayer can choose to allocate a low-cost asset to a low-value pool for the income year in which it starts to be used for a taxable purpose.

A low-cost asset is a depreciating asset, except a horticultural plant, whose cost (after GST credits or adjustments) as at the end of the income year in which it starts to be used for a taxable purpose is less than $1,000 (subsection 40-425(2) of the ITAA 1997).

The cost of a depreciating asset consists of two elements. The first element is worked out at the time you begin to hold the asset and includes its acquisition cost. The second element includes amounts paid, since starting to hold the asset, that have contributed to its present condition and location (sections 40-175 to 40-190 of the ITAA 1997). The first element cost of the carpet was $800 and there has been no second element cost.

As the carpet had a cost of less than $1,000 for the 2002-03 income year, when it was first used for a taxable purpose, the carpet is a low-cost asset under subsection 40-425(2) of the ITAA 1997.

Date of decision: 19 January 2003

Year of income:Year ended 30 June 2003

Legislative references:
Income Tax Assessment Act 1997
   section 40-30
   section 40-175
   section 40-425
   subsection 40-425(1)
   subsection 40-425(2)

Related ATO Interpretative Decisions
ATO ID 2003/946

Other references
Guide to depreciating assets 2002-03

Capital Allowances CoE
Depreciating assets
Low value pool

Siebel/TDMS reference number: 3827884; 1-AVBXHEJ

Business line: Small Business/Individual Taxpayers

Date of publication: 6 February 2004

ISSN: 1445-2782

ATO ID 2004/115 (Withdrawn) history   Top  
   Date   Version 
   19 January 2003   Original statement   
 You are here ®   5 May 2017   Withdrawn   


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