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Accelerated depreciation

Last updated 31 May 2005

For plant acquired between 27 February 1992 and 11.45am (by legal time in the ACT) on 21 September 1999, accelerated rates of depreciation and broadbanding were available. The rates were based on effective life adjusted by a loading of 20% and broadbanded into one of seven rate groups. The loading together with the broadbanding produced accelerated rates of deductions for depreciation.

Except for certain small business taxpayers, accelerated rates of depreciation are not available for plant you:

  • acquired under a contract entered into after 11.45am (by legal time in the ACT) on 21 September 1999
  • constructed, with construction starting after that time, or
  • acquired in some other way after that time.

Small business taxpayers could continue to use accelerated rates for plant acquired after that time if they met certain conditions when the plant was first used or installed ready for use. However, accelerated rates of depreciation have been removed for small business taxpayers for depreciating assets they:

  • started to hold under a contract entered into after 30 June 2001
  • constructed and construction began after that time, or
  • started to hold in some other way after that time.

If you used accelerated rates of depreciation for an item of plant before 1 July 2001, or could have used accelerated rates had you used the plant, or had it installed ready for use, for producing assessable income before that day, you continue to use accelerated rates to work out the decline in value under the UCA. You replace the effective life component in the formula for working out the decline in value with the accelerated rate you were using. For a list of Accelerated rates of depreciation see Accelerated rates of depreciation.

Start of example

Example: Working out decline in value using accelerated rates of depreciation (ignoring any GST impact)

Peter purchased a machine for use in his business for $100,000 on 1 July 1999.

As the machine was acquired before 21 September 1999, Peter can use accelerated rates of depreciation to calculate his deductions. Using the prime cost method, a depreciation rate of 20% applies as the machine has an effective life of eight years.

To work out his deduction for the 2002–03 income year, Peter continues to use the same cost, method and rate that he was using before the start of the UCA.

The decline in value of the machine for the 2002–03 income year of $20,000 is worked out as follows:

Asset's cost × (days held ÷ 365) × prime cost rate

$100,000 × (365 ÷ 365) × 20%

End of example