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Effect of recalculating effective life

Last updated 26 August 2007

If you recalculate the effective life of a depreciating asset, the new effective life starts to apply for the income year for which you make the recalculation.

If you are using the diminishing value method to work out the decline in value of a depreciating asset, you use the new estimate of effective life in the formula as the asset's effective life. Under the prime cost method, you must use the adjusted prime cost formula from the year for which you recalculate the asset's effective life - see Methods of working out decline in value for information about the adjusted prime cost formula.