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Depreciating assets you use for work

As an employee, find out how to claim for your depreciating assets and work out decline in value.

Last updated 25 April 2023

What are depreciating assets?

Depreciating assets are assets that have a limited effective life and can reasonably be expected to lose value over the time they are used. These assets can be used for a long time (normally more than one year).This includes items such as tools, computers or books.

Costs for capital assets are capital expenditure, and you can't claim a deduction for them under normal deduction rules (known as the general deductions provisions).

You may be able to claim a deduction for the decline in value of depreciating assets each year under the capital allowances provisions . You will need to work out the effective life and the cost of the asset.

Jointly held assets

If you have joint ownership of a depreciating asset with someone else, your interest (portion you own) is the amount that is relevant as the cost of the depreciating asset.

Generally, the owner (or owners if the asset is jointly held) of the depreciating asset can claim a deduction for its decline in value.

Cost of depreciating assets

Before you can claim a deduction for a depreciating asset you need to consider the cost of the asset. There are 2 elements to the cost of an asset:

  1. The amount you pay for it (the purchase price) at the time you buy it and any other expenses you incur to acquire the asset (such as shipping).
  2. Any amounts you pay after you buy the asset, including the costs to:
    1. bring the asset to its present condition – for example, the cost of making an improvement the asset such as attaching a towbar to your car
    2. bring the asset to its present location – for example, the cost of moving an asset to a different location or getting the towbar you are attaching to your car delivered to you.
     

There are also 2 different treatments for depreciating assets, depending on whether they cost more or less than $300.

An immediate deduction is allowable for certain capital assets costing $300 or less. You must satisfy the conditions of 4 tests to claim an immediate deduction.

If you're not eligible to claim the immediate deduction for the asset, you may choose to allocate the depreciating asset to a low-value pool where its cost is less than $1000.

If you're not eligible to claim the immediate deduction, you can claim a deduction for the decline in value of a depreciating asset over the effective life where either:

You can't treat items that are part of a set or identical separately to avoid working out the decline in value.

You need to apportion your claim if you use the item for both work and private purposes. You must also keep records to show how you work out your work-related use.

The 4 tests to claim an immediate deduction for a depreciating asset you use for work that cost $300 or less.

Find out how to claim a decline in value deduction for a depreciating asset you use for work and cost more than $300.

Which records to keep for depreciating assets so you can claim a deduction and show how you calculate work use.

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