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  • Effective life



    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

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    In broad terms, the effective life of a depreciating asset is how long it can be used by you for any purpose, including a taxable purpose, having regard to the wear and tear you reasonably expect from your expected circumstances of use and assuming reasonable levels of maintenance. Effective life is expressed in years, including fractions of years. It is not rounded to the nearest whole year.

    You can either make your own estimate of the effective life of the asset or adopt the effective life determined by the Commissioner. The matters you need to take into account if you decide to make your own estimate of effective life are explained in the Guide to depreciating assets.

    The effective life of a depreciating asset as determined by the Commissioner is found in Taxation Ruling IT 2685 Income tax: depreciation and Taxation Ruling TR 2000/18 Income tax: depreciation effective life. IT 2685 was issued on 11 June 1992 and remained in force until it was replaced by TR 2000/18 which came into force on 1 January 2001. If you decide to use the effective life determined by the Commissioner you generally use the effective life contained in the particular taxation ruling that was in force at the time you entered into a contract to acquire the depreciating asset.

    Last modified: 11 Dec 2019QC 16578