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Effective life

Last updated 17 July 2006

Generally, the effective life of a depreciating asset is how long it can be used by any entity for a taxable purpose or for the purpose of producing exempt income or non-assessable non-exempt income:

  • having regard to the wear and tear you reasonably expect from your expected circumstances of use
  • assuming that it will be maintained in reasonably good order and condition, and
  • having regard to the period within which it is likely to be scrapped, sold for no more than scrap value or abandoned.

Effective life is expressed in years, including fractions of years. It is not rounded to the nearest whole year.