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  • Depreciating assets

    Capital assets that have a limited life expectancy (effective life) and can reasonably be expected to depreciate over time are also known as depreciating assets. They include:

    • computers
    • electrical tools
    • furniture, carpet and curtains
    • motor vehicles
    • plant and equipment.

    There is a general set of rules that applies across a variety of depreciating assets and certain other capital expenditure. Broadly, the effective life of the asset, expressed in years, will usually govern the number of years over which you will need to apportion the cost.

    The amount you can claim will generally be less if you:

    • own the asset for less than one year
    • only partly use the asset for business purposes – that is, if you use it for 60% business purposes, you can only claim 60% of its total depreciation for that year
    • own the asset for some time before you start the business – in this case, you must work out how much the asset depreciated before you started the business and use the reduced value as the asset’s base value.

    There are exceptions to the general depreciation rules, such as those that apply to construction costs in relation to capital works. Capital works include:

    • improvements to land such as buildings, windmills and fences
    • structural improvements
    • environment protection earthworks.

    See also:

    Last modified: 03 Apr 2017QC 51612