Uniform capital allowance system: changing a depreciating asset's effective life

Uniform capital allowance system

From 1 July 2001, the uniform capital allowance (UCA) rules will apply to most depreciating assets. Taxpayers generally calculate deductions for the decline in value of their depreciating assets using these rules.

Under the UCA rules, deductions for the decline in value of depreciating assets are generally calculated on the basis of effective life. You can choose to recalculate the effective life of an asset in certain circumstances where the effective life you have been using is no longer accurate. If you make an improvement to an asset, you may be obliged to recalculate its effective life.

If you are using the simplified depreciation rules, generally you will not use the UCA rules. Under the simplified depreciation rules, you can claim an immediate deduction for most depreciating assets costing less than $1,000 and pool most other depreciating assets. You can use the simplified depreciation rules if you are a small business entity (2007-08 and later years). You must use the simplified depreciation rules for income years where you were in the simplified tax system (2006-07 and earlier years). For more information see www.ato.gov.au/sbconcessions