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  • Adjustments to cost for depreciation purposes



    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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    The calculation of depreciation is generally based on the cost of the plant to you. Cost includes:

    • the original purchase price or construction cost
    • transport costs
    • installation costs
    • customs duty
    • relocation costs.

    The cost for depreciation purposes may differ from the cost to you of the item of plant. The cost to you may be altered to arrive at a cost for depreciation in a number of circumstances. This occurs where:

    • the cost of the car exceeds the depreciation cost limit for certain motor vehicles
    • a car is acquired at a discount and plant (including a car) is traded in on the purchase of the car and the pre-discount price exceeds the car depreciation limit
    • the plant is a car that is or has been affected by the luxury car lease provisions
    • an inflated price is paid for the plant under a non-arm's length transaction
    • a lessor who is treated as a quasi-owner acquires plant under a sale and lease-back arrangement
    • part of the plant's cost is deductible under a provision other than the depreciation provisions
    • another taxpayer has previously claimed depreciation deductions for the plant, in particular where the plant is acquired from an associate
    • the plant is acquired by roll-over and
    • trading stock becomes plant.

    If you acquire an item of plant either wholly or partly for a creditable purpose, the amount of the GST input credits allowable on that acquisition is excluded when calculating the cost for depreciation purposes.

    Where plant is acquired by way of inheritance, gift or prize, its cost for depreciation purposes is its depreciated value immediately before the date of acquisition. See Taxation Ruling IT 2308 - Income tax: depreciation of plant acquired otherwise than by purchase.

    In addition, measures contained in Division 58 of ITAA 97 affect the way in which depreciation deductions and balancing adjustments are calculated in respect of depreciable plant previously owned by a tax exempt entity which enters the tax net on or after 4 August 1997 by way of:

    • an entity sale-plant continues to be owned by the exempt entity that becomes taxable or
    • an asset sale-plant is acquired by a taxable purchaser from a tax exempt entity in connection with the acquisition of a business.

    If you are not sure of the cost of an item of plant for depreciation purposes, contact your professional tax adviser or ring the ATO.

    Depreciation cost limit for certain motor vehicles

    Motor cars and station wagons, including four-wheel drive versions, are subject to a depreciation cost limit. This means you cannot depreciate any part of the cost of such a vehicle that is more than the limit for the year in which you first used it.

    Depreciation cost limits for the last 6 years













    Last modified: 13 Feb 2020QC 27380