• What is a 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. Depreciating assets include such items as computers, electric tools, furniture and motor vehicles.

    Land and items of trading stock are specifically excluded from the definition of depreciating asset.

    Most intangible assets are also excluded from the definition of depreciating asset. Only the following intangible assets are specifically included as depreciating assets:

    • in-house software - see In-house software
    • certain items of intellectual property (patents, registered designs, copyrights and licences of these) mining, quarrying or prospecting rights and information
    • certain indefeasible rights to use an international telecommunications submarine cable system
    • spectrum licences
    • datacasting transmitter licences.

    Improvements to land or fixtures on land - for example, windmills and fences - may be depreciating assets and are treated as separate from the land regardless of whether they can be removed or not.

    In most cases, it will be clear whether or not something is a depreciating asset. If you are not sure, contact your recognised tax adviser or the Tax Office.

    Depreciating assets excluded from the UCA

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    Warning:

    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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    Deductions for the decline in value of some depreciating assets are not worked out under the UCA. These are:

    • depreciating assets for which deductions are available under the specific film provisions
    • depreciating assets that are capital works - for example, buildings and structural improvements for which deductions are available under the separate provisions for capital works or would have been available if the assets had met certain conditions for the deductions
    • cars where you use the 'cents per kilometre' method or the '12% of original value' method for calculating car expenses - these methods take the decline in value into account in their calculation
    • indefeasible rights to use an international telecommunications submarine cable system if the expenditure was incurred or the system was used for telecommunications purposes at or before 11.45am by legal time in the Australian Capital Territory (ACT)] on 21 September 1999.
    Last modified: 31 Oct 2005QC 27521