The effective life of a depreciating asset is the period over which it’s expected to be used to produce income. This timeframe helps determine how much of the asset’s cost you can claim as a tax deduction each year. We set the effective lives for different types of assets based on how long they typically last in real-world business use.
As part of our regular legislative instrument review process, we’ve finalised Income Tax (Effective Life of Depreciating Assets) Determination 2025External Link following consultation in June. This guidance replaces the previous legislative instrument from 2015, which sunsets on 1 October 2025.
Tax Ruling 2022/1 will be withdrawn at the end of October 2025. This ruling explained the methodology we used to decide on the effective life of depreciating assets. We're withdrawing this ruling as the effective life determinations are available in either:
- Income Tax (Effective Life of Depreciating Assets) Determination 2025External Link
- Effective life of depreciating assets web guidance, which also includes non-binding explanatory material from the 2022 ruling.
What this means for you
For businesses, this change is purely administrative. The new instrument continues to provide effective life determinations for depreciating assets under Division 40 of the Income Tax Assessment Act 1997. Importantly, there are no changes to how we engage with you or how you apply these rules.
When you're applying the effective life of a depreciating asset, make sure you use the rate that best applies to you. When deciding which effective life applies to a depreciating asset, consider the:
- time the asset was acquired
- time the asset was first used or was installed ready for use
- type of asset.
If the effective life of an asset is not listed in our legislative instrument, you may wish to apply for a review.
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