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  • Depreciation calculation for plant acquired after 11.45am on 21 September 1999



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

    End of attention

    For all plant (including motor vehicles) acquired after 11.45am [by legal time in the Australian Capital Territory (ACT)] on 21 September 1999 the depreciation deduction rate is determined solely by reference to effective life as determined by the taxpayer or by the Commissioner. However, this does not apply to small business taxpayers who satisfy certain qualifying conditions (see Small business taxpayers)-these taxpayers can still use the accelerated rates of depreciation.

    There are two methods of calculating depreciation:

    • the diminishing value method, and
    • the prime cost method.

    You choose the method of calculating depreciation in the first year that you are allowed a depreciation deduction. Once you have chosen a method you cannot change to the other method for that item. However, you can recalculate the effective life component contained in the method you are using.

    Under the diminishing value method the deduction is calculated as a percentage of the balance you have left to deduct. The formula for calculating depreciation using the diminishing value method is:

    Opening undeducted cost × (days owned ÷ 365) × (150% ÷ plant's effective life in years)

    Under the prime cost method the deduction for each year is calculated as a percentage of the cost. The formula for determining the amount of depreciation deduction under the prime cost method is:

    Cost × (days owned ÷ 365) × (100% ÷ plant's effective life in years)

    Example-diminishing value method

    The cost of an item of plant purchased on 1 July 2000 is $1,000. It has an effective life of 5 years and it is owned for the full year for producing assessable income. The depreciation deduction will be $300 calculated as follows:

    $1,000 × (365 ÷ 365) × (150% ÷ 5)

    End of example

    Example-prime cost method

    Assume that the same facts apply as for the previous example. The depreciation deduction is $200 calculated as follows:

    $1,000 × (365 ÷ 365) × (100% ÷ 5)

    End of example
    Last modified: 13 Feb 2020QC 27380