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Depreciating asset acquired with other property

Last updated 7 April 2020

If you pay an amount for a depreciating asset and something else, only that part of the payment that is reasonably attributable to the depreciating asset is treated as being paid in relation to it. This applies to first and second elements of cost.

The Tax Office generally accepts independent valuations as a basis for this apportionment. However, if there is no independent valuation, you may need to demonstrate that your apportionment of the amount paid is reasonable. Apportionment on the basis of the market values of the various items for which the payment is made will generally be reasonable.

Example: Apportionment of cost

Sam undertakes to pay an upholsterer $800 for a new desk and $300 to re-upholster a chair in a more durable material. He negotiates a trade discount of $100. The $1,000 paid should be apportioned between:

  • the first element of cost of the desk
  • the second element of cost of the chair

based on the relative market values of the desk and the labour and materials used to upholster the chair.