You may be able to claim a deduction for the decline in value of your depreciating assets. A depreciating asset is an asset that has a limited effective life and can reasonably be expected to decline in value over the time it is used.
Examples of depreciating assets include:
- computers
- electrical tools
- furnishings
- carpet and curtains
- motor vehicles.
You work out the decline in value of a depreciating asset using either the prime cost or diminishing value method. Both methods are based on the effective life of an asset. For most depreciating assets, you choose whether to self-assess the effective life or adopt the Commissioner's determination.
The decline in value of certain assets with a cost or opening adjustable value of less than $1,000 can be worked out through a low-value pool.
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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
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Non business use
A deduction for the decline in value of a depreciating asset is not allowable if the depreciating asset is used solely for private purposes.
Where an item is used for part of a year or is used in part for producing income, you may not be able to claim a deduction for the full amount.
Depreciating assets excluded from the UCA
Deductions in relation to the following types of depreciating assets are not worked out under the UCA:
- depreciating assets for which deductions are available under the specific film provisions
- depreciating assets that are capital works, such as buildings and structural improvements, for which deductions would be available under the separate provisions for capital works, and
- cars where you use the cents per kilometre method or the 12 per cent of original value method for calculating car expenses, both of which take the decline in value into account in their calculation.
More information
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For more information:
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Last Modified: Wednesday, 25 January 2012