The ATO depreciation rates determine tax deductions which represent the decline in value over time of assets which are associated with your income-earning activities.
|Commissioner’s Effective Life Rulings|
Self Assessment of Effective Life
You don’t have to use the Commissioner’s estimate when determining the effective life of an asset for depreciation purposes – the alternative is to choose to self assess. For information about the self-assessment process, see: Self Assessment of Depreciation rates.
The Tax Office has issued a draft ruling TR 2017/D1 containing guidance on how and when to treat depreciable components as separate assets, or as a single asset.
The draft ruling sets forth the following factors as the decision basis for determining whether a separate asset is defined:
- ‘Identifiable’: the depreciating asset performs a separately identifiable function
- ‘Use’: a depreciating asset will tend to be an item that performs a discrete function
- ‘Degree of integration’: the depreciating asset will tend to have a high degree of physical integration
- ‘Effect of attachment’: the item, when attached to another asset having its own independent function, varies the performance of that asset.
- ‘System’: a depreciating asset will tend to be the multiple components that are purchased as a system to function together as a whole
There are 13 practical examples discussed in the draft ruling, including industrial storage racking, a desktop computer package, mainframe computer system, local area network, aircraft engine and airframe in service on rotation, car GPS, jointly held fibre optic cable communications system, electricity distribution line, replacement electricity pole, upgrade of transformer, rail transport infrastructure, new railway branch line, solar power system and photographic lighting equipment.
Categories of depreciation
Broadly, depreciation is a special deduction for costs which provide a benefit over more than one financial year. Each category of depreciation claim has specific rules and circumstances.
There are categories which allow immediate deductions, small business entity claims, low value pools and the software development pool, and for miners and primary producers.
If your circumstances don’t match (or in some cases if you don’t choose) one of the specific categories, then there are general claims which can be made under more general rules for “depreciating assets” – see below “Depreciation Methods“.
Here’s a brief listing of depreciation rules and categories:
- ATO’s depreciation calculator tool
- Depreciation rates
- BMT Online Depreciation Rate Finder
- ATO depreciation tax claims booklet, the Guide to depreciating assets
- Other capital expenses
This page was last modified 2018-01-20