• Guidelines for using the depreciating assets worksheet

    The depreciating assets worksheet

    Primary production only and Non-primary production only: Use a separate worksheet for each category.

    Cost: The cost of a depreciating asset includes the first and second elements of cost. You must adjust the cost of an asset in certain circumstances, such as when the first element of a car’s cost exceeds the car limit. If you have adjusted the cost of the asset, include the adjusted cost in this column; see The cost of a depreciating asset.

    Opening adjustable value and Adjustable value at end of year: The adjustable value of a depreciating asset at any time is its cost reduced by any decline in value up to that time. The opening adjustable value of an asset for an income year is generally the same as its adjustable value at the end of the previous income year.

    Balancing adjustment events: Generally, a balancing adjustment event occurs for a depreciating asset when you stop holding it (for example, if you sell it) or when you stop using it and you expect never to use it again; see What happens if you no longer hold or use a depreciating asset?

    Termination value: Generally, the termination value is what you receive or are taken to have received for the asset as a result of a balancing adjustment event, such as the proceeds from selling the asset; see Termination value.

    Balancing adjustment amounts: If the asset’s termination value is greater than its adjustable value, the excess is generally an assessable balancing adjustment amount. If the termination value is less than the adjustable value, the difference is a deductible balancing adjustment amount. If you use the asset for a non-taxable purpose, you reduce the balancing adjustment amount and a capital gain or capital loss may arise; see Depreciating asset used for a non-taxable purpose.

    Balancing adjustment relief: This refers to the offsetting of otherwise assessable balancing adjustment amounts for involuntary disposals (see Involuntary disposal of a depreciating asset) or when rollover relief applies; see Rollover relief.

    Decline in value: There are two methods of working out the decline in value of a depreciating asset, prime cost and diminishing value; see Methods of working out decline in value.

    Effective life and Percentage rate: Both the prime cost and diminishing value methods are based on a depreciating asset’s effective life; see Effective life. However, if you are able to use accelerated rates of depreciation (see Accelerated depreciation) you use the relevant percentage rate to work out the decline in value rather than the effective life.

    A list of accelerated rates is provided; see Accelerated rates of depreciation.

    Taxable use percentage: This is the proportion of your use of a particular depreciating asset for a taxable purpose.

    Deduction for decline in value: Your deduction for the decline in value of the asset is the decline in value reduced to the extent you used the asset for a non-taxable purpose; see Decline in value of a depreciating asset used for a non-taxable purpose. Your deduction may also be reduced if the asset is a leisure facility or a boat.

    Accelerated rates of depreciation

    You only use the tables below if you are able to use accelerated depreciation; see Accelerated depreciation. You use the rate that corresponds to the effective life of the item of plant. The following tables show the appropriate rates.

    For most general items of plant the accelerated rates are as follows (note that the first four categories are unlikely to apply for currently held items as the rates only apply to items acquired before 1 July 2001 with an effective life of less than ten years):

    Effective life in years

    Prime cost rate %

    Diminishing value rate %

    Less than 3

    100

    3 to less than 5

    40

    60

    5 to less than 6 2/3

    27

    40

    6 2/3 to less than 10

    20

    30

    10 to less than 13

    17

    25

    13 to less than 30

    13

    20

    30 or more

    7

    10

    For most cars and motorcycles the following rates apply. The first four categories are unlikely to apply for currently held cars and motorcycles as the rates only apply to items acquired before 1 July 2001 with an effective life of less than ten years.

    Effective life in years

    Prime cost rate %

    Diminishing value rate %

    Less than 3

    100

    3 to less than 5

    33

    50

    5 to less than 6 2/3

    20

    30

    6 2/3 to less than 10

    15

    22.5

    10 to less than 13

    10

    15

    13 to less than 20

    8

    11.25

    20 to less than 40

    5

    7.5

    40 or more

    3

    3.75

    Guidelines for using the low-value pool worksheet

    See the low-value pool worksheet.

    Description of low-value asset: In this column include a brief description of any low-value assets you allocated to the pool for the current year. A low-value asset is a depreciating asset (other than a horticultural plant) that is not a low-cost asset but that has an opening adjustable value of less than $1,000 worked out using the diminishing value method.

    Opening adjustable value of low-value asset: The adjustable value of any depreciating asset at any time is its cost (first and second elements) reduced by any decline in value up to that time. The opening adjustable value of an asset for an income year is generally the adjustable value at the end of the previous income year.

    Taxable use percentage: When you allocate an asset to a low-value pool, you must make a reasonable estimate of the percentage of your use of the asset that will be for a taxable purpose over its effective life (for a low-cost asset) or its effective life remaining at the start of the income year it was allocated to the pool (for a low-value asset).

    Reduced opening adjustable value of low-value asset: This is the taxable use percentage of the opening adjustable value of any low-value asset you have allocated to the pool for the income year.

    Description of low-cost asset or second element of cost of asset in pool: In this column include a brief description of any low-cost assets you allocated to the pool for the income year. A low-cost asset is a depreciating asset (other than a horticultural plant) whose cost (first and second elements) as at the end of the year in which the start time occurred is less than $1,000. Also show in this column a description of any amounts included in the second element of cost of any assets in the pool at the end of the previous year and of any low-value assets allocated for this year. The second element of an asset’s cost is capital expenditure on the asset which is incurred after you start to hold it, such as a cost of improving the asset; see The cost of a depreciating asset.

    Cost of low-cost asset and Second element of cost: Include the cost after you have made any adjustments, such as for GST input tax credits; see The cost of a depreciating asset.

    Reduced cost of low-cost asset or second element of cost: This is the taxable use percentage multiplied by:

    • the cost of each low-cost asset you allocated to the pool for the income year
    • any amounts included in the second element of cost for the income year for  
    • assets in the pool at the end of the previous year
    • low-value assets which you allocated to the pool in the current income year.

    Balancing adjustment events: Generally, a balancing adjustment event occurs for a depreciating asset if you stop holding it (for example, if you sell it) or you stop using it and you expect never to use it again; see What happens if you no longer hold or use a depreciating asset?

    Termination value: Generally, the termination value is what you receive or are taken to have received for the asset as a result of a balancing adjustment event, such as the proceeds from selling the asset; see Termination value.

    Reduced termination value: This is the taxable use percentage of the asset’s termination value. Use the taxable use percentage you estimated when you allocated the asset to the pool. This reduced termination value decreases the amount of the closing pool balance. If it exceeds the amount of the closing pool balance, make that balance zero and include the excess in assessable income. If you use the asset for a non-taxable purpose, a capital gain or capital loss may arise when a balancing adjustment event occurs for the asset; see Balancing adjustment event for a depreciating asset in a low-value pool.

    Worksheet 1: Depreciating assets

    Download Worksheet 1: Depreciating assets (PDF 12KB) here.

    Worksheet 2: Low-value pool

    Download Worksheet 2: Low-value pool (PDF 12KB) here.

    Last modified: 26 May 2016QC 48118