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  • E1 and E2 Decline in value of depreciating assets

    Attention

    Warning:

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

    End of attention

    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 2018–19.

    If you are uncertain whether an asset is a depreciating asset or whether you can claim a deduction, see Guide to depreciating assets 2019.

    E1 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:

    If the SMSF pays retirement phase income stream benefits to a member, refer to How expenses are treated when a 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 2019.

    You can work out your capital allowance deductions by using the Depreciation and capital allowances tool (DCAT).

    From 1 July 2017, you are generally not entitled to a deduction for decline in value of certain second-hand depreciating assets in your residential property:

    • which you entered into a contract to acquire, or which you otherwise acquired, at or after 7.30 pm on 9 May 2017, or
    • which you used, or had installed ready for use, for any private purpose in 2016–17 or earlier, and for which you were not entitled to a deduction for a decline in value in 2016–17.

    You may be entitled for these deductions if you are using your residential rental property in carrying on a business (including the business of property investing) or another exception applies.

    Residential rental property is residential premises you use to provide residential accommodation for the purpose of producing assessable income.

    For more information, see:

    E2 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 2018–19 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 retirement phase income stream benefits 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 2018–19.

    Using the rules described at How expenses are treated when a 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
    Last modified: 03 Oct 2019QC 58668