Decline in value calculator
Asset details screen
Table of contents
Completing the asset details screens
Date the asset started to decline in value
Date you disposed of or stopped using the asset
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
You can enter a short description to identify the asset. This description is used in the reports generated by the Decline in value calculator.
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.
Note: If you initially use an asset for private purpose then in
later year 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 depreciating asset used for non-taxable purpose’ in the Guide to depreciating assets
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.
Cost
The cost of a depreciating asset consists of the first and second elements of cost. The first element is, broadly, capital expenditure you are taken to have paid to hold the asset, such as the purchase price. It is worked out as at the time you began to hold the asset.
The second element is capital expenditure incurred after that time, such as the cost of improving the asset.
Note:
This calculator should not
be used if the asset has any second element costs.
The cost of a depreciating asset does not include:
- amounts of input tax credits for which you are or become entitled – see GST input tax credits below
- expenditure that is not of a capital nature, or
- any amount that you can deduct, or which is taken into account in working out a deductible amount, under provisions outside the UCA.
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.
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.
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:
- the diminishing value method, and
- the prime cost method.
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 you cannot change to the other method for that item.
The diminishing value deductible amount is the opening adjustable value divided by either:
- the effective life, multiplied by 1.5. This applies to the assets you started to hold before 10 May 2006, or
- the effective life, multiplied by 2.0. This applies to the assets you started to hold on or after 10 May 2006
This amount is apportioned for any part-year ownership and then reduced by the percentage non-taxable use.
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:
- the cost divided by the effective life apportioned for any part-year ownership, and
- the opening adjustable value,
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 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 2011/2 – Income tax: effective life of depreciating assets came into force on 1 July 2011 and replaced Taxation Ruling TR 2010/2. For ease of reference, the ATO has prepared a consolidated version of the amended determination which is set out in the Schedule to TR 2011/2.
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:
- enter into a contract to acquire an asset
- otherwise acquire it, or
- start to construct it.
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 2011/2, 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 2011/2
|
Depreciating asset |
Effective life in years given in TR 2011/2 |
| 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 |
|
Library (professional) |
10 |
|
Motor vehicles, etc – cars
|
8 |
|
Plants Live (indoor) |
5 |
|
Refrigerators |
10 |
|
Televisions (not used for hire) |
10 |
|
Vacuum cleaners (electric) |
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 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. The list of depreciating assets includes effective lives previously determined, and revised and new determinations.
The new determination of effective lives of depreciating assets in residential rental properties only applies to assets acquired on or after 1 July 2004. This means that if you owned a residential rental property before 1 July 2004 you do not need to adjust the effective lives of any assets you held in that rental property as at 30 June 2004. Nor do you need to amend your decline in value deductions for claims made in years prior to 1 July 2004.
For more information, see 'Residential rental property assets' in Rental properties.
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 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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