Depreciating assets are capital assets, such as cars, computers or machinery. Their cost is not generally an expense at the time of purchase, but their value may decline over their effective life. This decline in value may be a deduction or a non-deductible expense.
Did the SMSF's depreciating assets decline in value?
No |
Leave E1 and E2 blank. Go to F1 and F2. |
|---|---|
Yes |
Read on. |
Write at E1 and E2, as required, the amount by which the SMSF's depreciating asset declined in value during 2016–17.
If you are uncertain whether an asset is a depreciating asset or whether you can claim a deduction, see Guide to depreciating assets 2017.
Deductible decline in value of depreciating assets
Write at E1 the deductible amount for the decline in value of the SMSF's depreciating assets, for example, the decline in value of a depreciating asset that the SMSF uses for the purposes of earning assessable income.
Do not include at E1 an amount for the decline in value of an asset to the extent the amount is taken into account in working out:
- foreign income (see Expenses that relate to foreign income)
- non-arm's-length income (see Expenses that relate to non-arm's-length income).
If the SMSF pays an income stream (pension) to a member, refer to How are expenses treated when an SMSF has ECPI? before you claim a deduction for the amount the SMSF's depreciating assets declined in value.
For more information, see Guide to depreciating assets 2017.
You can work out your capital allowance deductions by using the Depreciation and capital allowances tool (DCAT).
Non-deductible decline in value of depreciating assets
Write at E2 the amount for the decline in value of the SMSF's depreciating assets that is not deductible. This includes an amount for the decline in value of a depreciating asset to the extent the asset is used for the purposes of earning exempt income, such as exempt current pension income.
Example 'SMSF with no ECPI': Decline in value of depreciating assets
SMSF E has no exempt current pension income, foreign income or non-arm's-length income.
SMSF E owns a commercial property that it rents to a business. The property contains furnishings and fittings. SMSF E is able to claim a deduction of $4,000 for 2016–17 for the decline in value of the furnishings and fittings in the property.
SMSF E reports:
E1 Deductible decline in value of depreciating assets $4,000
E2 Non-deductible decline in value of depreciating assets (Blank)
End of example
Example 'SMSF with ECPI': Decline in value of depreciating assets
SMSF EE pays an income stream to one of its three members and some of its income is exempt from income tax under the exempt current pension income rules.
SMSF EE owns a commercial property that it rents to a business. The property contains furnishings and fittings. The decline in value of the furnishings and fittings is $4,000 for 2016–17.
Using the rules described at How are expenses treated when an SMSF has ECPI? SMSF EE determines that $1,000 of the depreciation relates to earning its exempt current pension income.
SMSF E reports:
E1 Deductible decline in value of depreciating assets $3,000
E2 Non-deductible decline in value of depreciating assets $1,000
End of example