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Understanding Depreciation | 2023 Gotax

September 18, 2023

Learn the fundamentals of Depreciation and your Income Tax

Depreciation is a term you might have come across when dealing with assets. But what does it mean in the context of the 2023 Australian Income Tax legislation for individual taxpayers?

Depreciation refers to the decline in value of an asset over time due to wear and tear, age, or obsolescence. In the context of Australian tax law, individual taxpayers can claim a deduction for the depreciation of certain assets they use for their employment.

Now, how do you calculate it? The Australian Taxation Office (ATO) provides a tool called the 'Depreciation and Capital Allowances Tool’. This tool can help you calculate the depreciation amounts for assets you use to produce income2.

The calculation takes into account factors such as the type of asset, its cost, and its effective life. The ATO provides guidelines on how to determine these factors.

Remember, not all assets are depreciable. The asset must be a depreciating asset, which is an asset that has a limited effective life and can reasonably be expected to decline in value over the time it is used.

In conclusion, understanding depreciation and how to calculate it is crucial for individual taxpayers. It can help you maximize your deductions and potentially reduce your tax liability. Always refer to the ATO’s guidelines or consult with a tax professional to ensure you’re calculating and claiming depreciation correctly.


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