Show download pdf controls
  • Uniform capital allowance system: calculating the decline in value of a depreciating asset

    From 1 July 2001, uniform capital allowance (UCA) rules apply to most depreciating assets. Taxpayers calculate deductions for the decline in value of their depreciating assets using these new rules.

    The UCA system combines a range of former capital allowance provisions including those relating to plant and equipment. It does this by providing a set of general rules to calculate a deduction for the decline in value of most depreciating assets. It maintains some concessional tax treatments such as those applying to primary production depreciating assets and expenditure. It also introduces new deductions for certain types of capital expenditure that did not previously attract a deduction.

    Find out about:

    See also:

    Simplified depreciation rules

    If you're using the simplified depreciation rules, you generally won't use the UCA rules. Under the simplified depreciation rules, you can claim an immediate deduction for most depreciating assets costing less than $30,000.

    Business with a turnover of up to $10 million can also claim a deduction for each asset purchased and first used or installed ready for use, up to the following thresholds:

    • $30,000, from 7:30 pm (AEDT) on 2 April 2019 until 30 June 2020
    • $25,000, from 29 January 2019 until before 7:30 pm (AEDT) on 2 April 2019
    • $20,000, before 29 January 2019.

    Your business clients can't immediately claim a deduction for individual assets that cost $30,000 or more. They can continue to deduct these over time using the small business pool or general depreciation rules, depending on their turnover.

    You can use the simplified depreciation rules if you are a small business entity (2007–08 and later income years).

    You must use the simplified depreciation rules for income years where you were in the simplified tax system (2006–07 and earlier income years).

    For more details refer to Simplified depreciation – rules and calculations

    When a depreciating asset starts to decline in value

    Under UCA, a depreciating asset starts to decline in value when you first use it (or install it ready for use) for any purpose, including a private purpose. However, a deduction for the decline in value is only for the part of the asset used for a taxable purpose.

    This means if you initially use an asset for a private purpose, and in later years use it for a taxable purpose (such as in a business), you need to work out the asset's decline in value over the period of its private use before you can work out the decline in value for the period you used it for taxable purposes.

    Example – working out start date of decline in value

    Robyn purchases a car on 1 July 2013 for $25,000. She uses the car entirely for private purposes until 1 March 2014 when she starts a new business. The car is then used wholly for business purposes.

    The car starts to decline in value from 1 July 2013 because it is being used from that date, but no part of the decline is an allowable deduction before 1 March 2014. This is because the car is not used for a taxable purpose before that date.

    End of example
      Last modified: 19 Jul 2019QC 16297