• Glossary

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    The UCA introduces a number of new terms and concepts, and adopts some from the former capital allowance provisions. All these terms are explained in this publication and compared with those used in the former depreciation rules in the table below:

    Former depreciation rules

    UCA

    Plant

    Depreciating asset

    Own

    Hold

    Cost

    First element and second element of cost

    Luxury car limit

    Car limit

    Income-producing use

    Taxable purpose

    -

    Start time

    Depreciation

    Decline in value

    Undeducted cost

    Adjustable value

    Depreciating asset-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-see What is a depreciating asset?.

    Hold-Only a holder of a depreciating asset may deduct an amount for its decline in value. In most cases, the legal owner of a depreciating asset will be its holder-see Who can claim deductions for the decline in value of a depreciating asset?

    First element of cost-The first element of cost is, broadly, the amount paid (money and/ or the market value of property given) or the amount taken to have been paid to hold the asset. It includes any additional amounts you spend on transporting the asset or installing it in position. It is worked out at the time you begin to hold the asset-see The cost of a depreciating asset.

    Second element of cost-The second element of cost is the amount paid (money and/ or the market value of property given) or the amount taken to have been paid to bring the asset to its present condition and location at any time, such as a cost of improving the asset. It is worked out after you begin to hold the asset-see The cost of a depreciating asset.

    Car limit-If the first element of cost of a car exceeds the car limit for the income year in which you start to hold it, that first element of cost is reduced to the car limit. The car limit is $55 134 for this income year-see Car limit for certain motor vehicles.

    Taxable purpose-Taxable purpose means for the purpose of producing assessable income. It also means for the purposes of exploration or prospecting and of mining site rehabilitation, and for environmental protection activities.

    Start time-A depreciating asset's start time is when you first use it, or install it ready for use, for any purpose, including a private purpose-see When does a depreciating asset start to decline in value.

    Decline in value-Deductions for the cost of a depreciating asset are based on the decline in value of the asset. For most depreciating assets, you have the choice of 2 methods to work out the decline in value of a depreciating asset: the prime cost method and the diminishing value method-see Methods of working out decline in value.

    Adjustable value-A depreciating asset's adjustable value at a particular time is its cost (first and second elements) less any decline in value up to that time.

    Last modified: 01 Jun 2005QC 27399