If you’re a sole trader who’s bought expensive equipment or assets for your business, you’ve probably heard the term “small business pool”.
Unfortunately, it’s not an actual swimming pool for small businesses (we checked), but rather the ATO’s way of simplifying how you claim depreciation on your pricier purchases. Depreciation can get complicated – a small business pool is designed to make your life easier.
Here’s everything you need to know about how a small business pool works, and how to use it in your business.
📖 If you’d rather read a longer article on the fundamentals of depreciation, no problem! Here you go.
What is a small business pool?
A small business pool is part of the ATO’s simplified depreciation rules. It’s essentially a pooled total of all your business assets that cost more than the instant asset write-off threshold (currently $20,000 for the 2025/26 financial year).
Instead of calculating depreciation separately for each expensive asset you own, you lump them all together in one “pool” and claim depreciation on the total value. Much simpler than tracking everything individually!
How does a small business pool work?
Great question!
First, you separate your assets into two categories: those worth less than $20,000, and those worth $20,000 or more. Anything under $20,000 can be claimed immediately in full under current instant asset write-off rules – too easy.
For assets worth $20,000 or more, you’ll need to add them to your small business pool. You can then claim depreciation on the total value of your pool at a rate of 15% in the first year, and 30% every year after that.
If your pool balance is below $20,000 at the end of the financial year, you can generally write off the remaining balance.
Who can use simplified depreciation?
You’re eligible to use simplified depreciation (and a small business pool) if your business has an annual turnover of less than $10 million. This has been the case since 2016, and most sole traders and small businesses in Australia can take advantage of it.
What about mixed business and personal use?
Like all business expenses, you can only claim the business portion of an asset’s cost. For assets under the threshold, this is fairly straightforward – if you use your laptop 70% for work and 30% for personal stuff, you claim 70% of its cost.
For pooled assets, it gets a bit trickier. When you add an asset to your pool, you calculate your business usage and only add that percentage of the asset’s value.
If your business usage changes in future years – say you start using your work vehicle more for personal trips – you’ll need to adjust the depreciation claim for your pool. This is where getting help from a tax agent (like us!) comes in handy, as the calculations can get complicated.
Why bother with a small business pool?
The ATO requires you to depreciate more expensive business assets. Without depreciation rules, claiming the full cost of expensive assets upfront would create massive fluctuations in your taxable income. One year you’d claim hefty deductions (and a tiny tax bill), the next year you’d have nothing to claim (and a hefty bill).
By spreading the tax benefit across the asset’s working life, you get steady, predictable deductions year after year. It’s more reflective of how you actually use expensive equipment in your business.
Plus, if you use Hnry, we handle all the small business pool depreciation calculations for you automatically – so you never have to think about tax again. Whoo!
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