Depreciating asset acquired from an associate



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If you acquire plant on or after 9 May 2001 or another depreciating asset on or after 1 July 2001 from an associate, such as a relative or partner, and the associate claimed or can claim deductions for the decline in value of the asset, you must use the same method of working out the decline in value as the associate used.

You must also use the same effective life as the associate used where they used the diminishing value method or an effective life equal to the remaining period of the effective life used by them where they used the prime cost method.

You must recalculate the effective life of the depreciating asset if the asset's cost increases by 10 per cent or more in any income year, including the one in which you start to hold it-see How to recalculate effective life for information about recalculating the effective life of a depreciating asset.

You can require the associate to tell you what method and effective life they used by serving a notice on them within 60 days after you acquire the asset. Penalties can be imposed if the associate intentionally refuses or fails to comply with the notice.

Last modified: 01 Jun 2005QC 27399