E Deduction for decline in value of depreciating assets
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Show at E the deduction for decline in value of depreciating assets for tax purposes.
The decline in value of a depreciating asset is generally worked out using either the prime cost or diminishing value method. Both methods are based on the effective life of an asset. For most depreciating assets, the fund can choose whether to self-assess the effective life or to adopt the Commissioner’s determination which can be found in TR 2014/4External Link Income tax: effective life of depreciating assets (applicable from 1 July 2014).
The fund can deduct an amount equal to the decline in value for an income year of a depreciating asset that it held for any time during that year. However, the deduction is reduced to the extent that the fund uses it or has it installed ready for use for other than a taxable purpose.
The decline in value of a depreciating asset costing $300 or less is its cost (but only to the extent the asset is used for a taxable purpose) if the asset satisfies all of the following requirements:
- it is used predominantly for the purpose of producing assessable income that is not income from carrying on a business
- it is not part of a set of assets acquired in the same income year that together cost more than $300, and
- it is not one of any number of substantially identical items acquired in the same income year that together cost more than $300.
The decline in value of certain assets with a cost or opening adjustable value of less than $1,000 can be calculated through a low-value pool. Assets eligible for an immediate deduction cannot be allocated to a low-value pool.
Deductible balancing adjustment amounts are included at L Other deductions.
Last modified: 21 Aug 2015QC 44343
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For an explanation of the concepts and terms mentioned above, and for more information on deductions for decline in value, see the Guide to depreciating assets 2015.
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