• What is a depreciating asset?

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    A depreciating asset is an asset that has a limited effective life and can reasonably be expected to decline in value over the time it is used. Depreciating assets include such items as computers, electric tools, furniture and motor vehicles.

    Land and items of trading stock are specifically excluded from the definition of depreciating asset.

    Most intangible assets are also excluded from the definition of depreciating asset. Only the following intangible assets are specifically included as depreciating assets:

    • in-house software - see In-house software.
    • certain items of intellectual property (patents, registered designs, copyrights and licences of these)
    • mining, quarrying or prospecting rights and information
    • certain indefeasible rights to use an international telecommunications submarine cable system
    • spectrum licences, and
    • datacasting transmitter licences.

    Improvements to land or fixtures on land - for example, windmills and fences - may be depreciating assets and are treated as separate from the land regardless of whether they can be removed or not.

    In most cases, it will be clear whether or not something is a depreciating asset. If you are not sure, contact your recognised tax adviser or the Tax Office.

    Last modified: 01 Oct 2006QC 27597