You may choose to recalculate the effective life of a depreciating asset if the effective life you have been using is no longer accurate because the circumstances relating to the nature of the asset's use have changed. You can recalculate an asset's effective life each time those circumstances change. It can be done in any income year after the one in which the asset's start time occurs and whether you worked out the previous effective life yourself or you used the effective life determined by the Commissioner.
Some examples of changed circumstances relating to the nature of the use of an asset are:
- your use of the asset turns out to be more or less rigorous than expected
- there is a downturn in the demand for the goods or services that the asset is used to produce that will result in the asset being scrapped
- legislation prevents the asset's continued use
- changes in technology make the asset redundant.
You cannot choose to recalculate the effective life of any depreciating asset for which you:
- used accelerated rates of depreciation before 1 July 2001 see Accelerated depreciation for information on accelerated rates of depreciation or
- could have used accelerated rates of depreciation before 1 July 2001 if you had used the asset to produce assessable income or had it installed ready for that use.
In addition, the effective life of certain intangible depreciating assets cannot be recalculated see Effective life of intangible depreciating assets.