• Accelerated depreciation

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

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    For plant acquired between 27 February 1992 and 11.45 am (by legal time in the ACT) on 21 September 1999, accelerated rates of depreciation and broadbanding were available. The rates were based on effective life adjusted by a loading of 20 per cent and broadbanded into one of seven rate groups. The loading together with the broadbanding produced accelerated rates of deductions for depreciation.

    Except for certain small business taxpayers, accelerated rates of depreciation are not available for plant you:

    • acquired under a contract entered into after 11.45 am (by legal time in the ACT) on 21 September 1999
    • constructed, with construction starting after that time or
    • acquired in some other way after that time.

    Small business taxpayers could continue to use accelerated rates for plant acquired after that time if they met certain conditions when the plant was first used or installed ready for use. However, accelerated rates of depreciation have now been removed for small business taxpayers for depreciating assets they:

    • start to hold under a contract entered into after 30 June 2001
    • construct and construction begins after 30 June 2001 or
    • start to hold in some other way after 30 June 2001.

    If you used accelerated rates of depreciation for an item of plant before 1 July 2001 or could have had you used the plant for producing assessable income, you continue to use accelerated rates to work out the decline in value under the UCA. You replace the effective life component in the formula for working out the decline in value with the rate you are using.

    For a list of accelerated rates of depreciation, see Accelerated rates of depreciation.

    Example

    Working out decline in value using accelerated rates of depreciation (ignoring any GST impact)

    Peter purchased a machine for $100 000 on 1 July 1999. As the machine was acquired before 21 September 1999, Peter can use accelerated rates of depreciation to calculate his deductions. Using the prime cost method, a depreciation rate of 20 per cent applies as the machine has an effective life of 8 years. The machine is used wholly in Peter's business. His depreciation deduction in each of the 1999-2000 and 2000-01 income years was $20 000, being 20 per cent of $100 000. This means the undeducted cost of the machine on 30 June 2001 and its opening adjustable value on 1 July 2001 was $60 000.

    To work out his deductions for the 2001-02 income year, Peter continued to use the same cost, method and rate that he was using before the start of the UCA. The decline in value of the machine for the 2001-02 income year of $20 000 was worked out as follows:

    Asset's cost

    x

    days held
    365

    x

    prime cost rate

    100 000

    x

    365
    365

    x

    20%

    Last modified: 01 Jun 2005QC 27399