• Requirement to recalculate effective life

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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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    In some circumstances, you must recalculate the effective life of a depreciating asset.

    You must recalculate the effective life of a depreciating asset if its cost is increased by 10% or more in an income year after the one in which its start time occurs and you either:

    • worked out the effective life of the asset yourself, or
    • used the Commissioner's determination of effective life (or a capped life) and the prime cost method to work out the asset's decline in value.

    Even though you may be required to recalculate the effective life of an asset, you may conclude that the effective life remains the same.

    You may also be required to recalculate the effective life of a depreciating asset:

    • which you acquired from an associate who claimed or could have claimed deductions for the asset's decline in value - see Depreciating asset acquired from an associate, or
    • for which you became the holder, where the user of the asset does not change or is an associate of the former user - for example, under a sale and leaseback arrangement - see Sale and leaseback arrangements.
    Last modified: 18 Jul 2006QC 27742