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Deductions for the cost of depreciating assets

Last updated 7 April 2020

Under income tax law, you are allowed to claim certain deductions for expenditure incurred in gaining or producing assessable income - for example, in carrying on a business. Some expenditure, such as the cost of acquiring capital assets, is generally not deductible. Generally, the value of a capital asset which provides a benefit over a number of years declines over its effective life. Because of this, the cost of capital assets used in gaining assessable income can be written off over a period of time as tax deductions.

Before 1 July 2001, the cost of plant (for example, cars and machinery) and software was written off as depreciation deductions.

From 1 July 2001, the uniform capital allowance system (UCA) applies to most depreciating assets, including plant. Under the UCA, deductions for the cost of a depreciating asset are based on the decline in value of the asset.