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  • Accelerated depreciation



    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 11.45am (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% and broadbanded into one of seven rate groups. The loading, together with the broadbanding, produced accelerated rates of depreciation.

    Generally, accelerated rates of depreciation have not been available for plant acquired after 11.45am (by legal time in the ACT) on 21 September 1999. To be taken to be plant acquired after that time, the plant must have been:

    • acquired under a contract entered into before that time
    • constructed, with construction starting before that time, or
    • acquired in some other way before that time.

    However, small business taxpayers have been able to continue to use accelerated rates for plant acquired after 21 September 1999 but before 1 July 2001 if they met certain conditions when the plant was first used or installed ready for use.

    Small business taxpayers have not been able to use accelerated rates of depreciation for assets they:

    • started to hold under a contract entered into after 30 June 2001
    • contructed, with construction starting after 30 June 2001, or
    • started to hold in some other way after 30 June 2001.

    You continue to use accelerated rates to work out the decline in value under the UCA if:

    • you used accelerated rates of depreciation for an item of plant before 1 July 2001, or
    • you could have used accelerated rates had you used the plant, or had you had it installed ready for use, for producing assessable income before that day.

    You replace the effective life component in the formula for working out the decline in value with the accelerated rate you were using. For a list of rates 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 use in his business 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 7% applies as the machine has an effective life of 30 years.

    To work out his deduction for the 2007–08 income year, Peter continues 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 2007–08 income year is $7,019, worked out as follows:

    Asset's cost × (days held [see Note] ÷ 365) × prime cost rate

    $100,000 × (366 ÷ 366) × 7%

    Note: can be 366 in a leap year

    End of example
    Last modified: 14 Jul 2020QC 27915