Decline in value calculator

Asset details screen

Table of contents

Completing the asset details screens

Description of the asset

Date the asset started to decline in value

Percentage non-taxable use

Cost

Jointly held assets

GST input tax credits

Decline in value methods

Effective life

§  General

§  How do I find the Commissioner's determination of the effective life if an asset ?

§  Rental property

Balancing adjustment event

Date you disposed of or stopped using the asset

Termination value

Completing the asset details screen

The following information will help you complete all relevant fields in the asset details screens.

These 'Help' files provide links to the Guide to depreciating assets for more detailed information. When you have finished reading the link, select the Back button on your browser to return to this ‘Help’ file. You may prefer to open the Guide to depreciating assets in a separate ‘Help’ window.

Description of the asset

You can enter a short description to identify the asset. This description is used in the reports generated by the Decline in value calculator.

Date the asset started to decline in value

This is the date you first used the asset, or installed it ready for use, for any purpose.

Percentage non-taxable use

An example of non-taxable use is private use. For instance, you might use a motor car partially for taxable purposes (for example, for business) and partially for private purposes. In this case, you are allowed only a partial deduction for decline in value, based on the percentage of your taxable use of the asset. If the asset is used only for taxable purposes the percentage of non-taxable use is zero.

attention Note: If you initially use an asset for private purpose then in later years use it for some taxable purpose, there has been a variation in non‑taxable use and this calculator should not be used for decline in value calculations for the asset. If you need help with your calculation, phone 13 28 61 between 8.00am and 6.00pm, Monday to Friday.

For more details, see ‘Decline in value of a depreciating asset used for non-taxable purpose’ in the Guide to depreciating assets

Cost

The cost of a depreciating asset consists of the first and second elements of cost. The first element is, broadly, the amounts you have paid or you are taken to have paid to hold the asset, such as the purchase price. It is worked out as at the time you begin to hold the asset.

The second element is capital expenditure incurred after that time, such as the cost of improving the asset.

attention Note: This calculator should not be used if the asset has any second element costs.

The cost of a depreciating asset does not include:

If the asset is a car and the first element of the car’s cost exceeds the car limit (see ‘Car limit’ in the Guide to depreciating assets), the first element of the cost will be the car limit.

attention Note: This calculator should not be used if the asset is a car for which the first element of cost exceeds the car limit. If you need help with your calculation, phone 13 28 61 between 8.00am and 6.00pm, Monday to Friday..

Jointly held assets

If a depreciating asset is held by more than one person, each holder works out their deduction for the decline in value of the asset based on the cost of their interest in the asset and not the cost of the asset itself.

GST input tax credits

If the acquisition or importation of a depreciating asset constitutes a creditable acquisition or a creditable importation, the cost of the asset is reduced by any input tax credit you are, or become, entitled to for the acquisition or importation.

If you become entitled to the input tax credit in an income year after the one in which the asset’s start time occurred, its opening adjustable value is also reduced by the amount of the input tax credit.

attention Note: Do not use this calculator if you become entitled to the input tax credit in an income year after the one in which the asset’s start time occurred, as the calculator is not suitable for use where there have been changes to the cost of the asset after the date the asset is first held. If you need help with your calculation, phone 13 28 66 between 8.00am and 6.00pm, Monday to Friday.

Decline in value methods

There are two methods of working out the decline in value of a depreciating asset:

You choose the method in the first year you are allowed a deduction for decline in value of the asset. Once you have chosen one method for a particular asset you cannot change to the other method for that asset.

The diminishing value deductible amount is generally the base value divided by either:

This amount is apportioned for any part-year ownership and then reduced by the percentage non-taxable use.

The base value is, in the first year in which the asset is used (or installed ready for use) for any purpose, its cost. In later years, the base value of the asset is the sum of its opening adjustable value for that year plus any second element costs for the year (eg costs, such as modification costs, incurred to bring the asset to its present condition and location).

attention Note: This calculator should not be used if the asset has any second element costs.

The prime cost method assumes that the value of a depreciating asset decreases uniformly over its effective life.

The prime cost deductible amount is the lesser of:

reduced by your percentage non-taxable use of the asset.

For a *depreciating asset that you acquire from an *associate of yours where the associate has deducted or can deduct an amount for the asset under Division 40 of the ITAA 1997. You must use the same method that the associate was using (section 40-65(2)). Note this is subject to various exceptions.

For more information see ‘Methods of working out decline in value’ in the Guide to depreciating assets.

Effective life

For most depreciating assets, you have a choice to either work out the effective life yourself or use an effective life determined by the Commissioner. The choice must be made for the income year in which you start using the asset, or have it installed ready for use, for any purpose. Generally, the choice must be made by the time you lodge your income tax return for that year. For more information, see ‘Effective life’ in the Guide to depreciating assets.

The Commissioner periodically revises the estimates of effective life. For more information on using the Commissioner’s effective life estimates, and to access the Commissioner’s latest estimates refer to ‘Effective life’ in the Guide to depreciating assets.

How do I find the Commissioner’s determination of the effective life of an asset?

Taxation ruling TR 2014/4 – Income tax: effective life of depreciating assets came into force on 1 July 2014 and replaced Taxation Ruling TR 2013/4. For ease of reference, the ATO has prepared a consolidated version of the amended determination which is set out in the Schedule to TR 2014/4.

Because the Commissioner periodically reviews the determinations of effective life, the determined effective life for a particular asset may change during an income year. You need to work out which determination is appropriate for you to refer to for a particular asset’s effective life.

As a general rule, you use the determination that is in force at the time you:

As a general rule if, for a particular asset, you were using an effective life from a determination which was in force (for example, one contained in the Schedule to TR 2009/4), and which has now been changed in TR 2014/4, you should continue to use that effective life for that particular asset.

For more information see ‘Effective Life’ in the Guide to depreciating assets.

Examples of effective lives determined by the Commissioner – from Taxation Ruling TR 2014/4

Depreciating asset

Effective life in years given in TR 2014/4

Exhaust fans (including light/heating)

10

Carpets

– in commercial office buildings

– tenpin bowling centres

 

 8

 4

Computers

– generally

– laptops

 

 4

 3

Concrete mixers

 4

Curtains and drapes

 6

Hot water installations for commercial office buildings

15

Lawn mower

– cylinder

– self-propelled (rotary)

 

 7

 2

Libraries (professional)

10

Motor vehicles, etc

– cars (motor vehicles designed to carry a load of less than one tonne and fewer than 9 passengers)

  • generally
  • hire and travellers cars
  • taxis 
  • motor cycles and scooters

 

 

 8
 5
 4
6 2/3

Refrigerators (used in residential rental property)

12

Television sets (used in residential rental property)

10

Vacuum cleaners (used in car washing and detailing)

10

Rental property

If you own or co-own a residential rental property, you may also be eligible to claim a deduction for the decline in value of any depreciating assets you hold in your rental property.

Rental properties 2014-15 contains a list of many items found in residential rental properties. The items are identified according to whether they are depreciating assets and eligible for a decline in value deduction or may be eligible for a capital works deduction. The Commissioner's determinations of effective life of more than 150 depreciating assets are also included.

For more information, see 'Residential rental property assets' in Rental properties 2014-15.

Balancing adjustment event

A balancing adjustment event occurs for a depreciating asset if you stop holding it or you stop using it – see ‘What happens if you no longer hold or use a depreciating asset’ in the Guide to depreciating assets. A common balancing adjustment event is the sale of a depreciating asset.

Date you disposed of or stopped using the asset

The date you disposed of, or stopped using, the depreciating asset is usually the date you sold it or it was destroyed, lost or abandoned.

Termination value

Generally, the termination value is what you receive, or are taken to receive, for an asset as a result of a balancing adjustment event – such as the proceeds from selling an asset.

It is the total of amounts you received and the market value of non–cash benefits (such as goods or services) you received for the asset. The most common example of termination value is the proceeds from selling an asset. The termination value may also be an insurance pay-out for the loss or destruction of a depreciating asset.

You may be required to include an amount in assessable income, or be eligible for a deduction depending on the assets terminating value.

For further information, see 'Termination value' in Guide to depreciating assets.

GST payable

The termination value is reduced by GST payable if the balancing adjustment event is a taxable supply. If you need help with your calculation, phone 13 28 66 between 8.00am and 6.00pm, Monday to Friday.

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