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How are depreciation deductions calculated?

Last updated 12 February 2020

Before 21 September 1999, depreciation deductions were calculated by applying a 'depreciation rate' fixed by reference to the effective life of an item of plant to either the cost or opening undeducted cost of that plant. After 21 September 1999, the legislation with the exception of small business taxpayers and certain specific items does not provide for a 'depreciation rate' as such, rather deductions are calculated using a statutory formula. However, effective life remains part of the formula for both the diminishing value method and the prime cost method.

QC27380