What is Depreciation on your Tax Return?

If you purchase new assets for work-related purposes and the cost is over $300 (if you're not in business), you can't claim the full cost of the new assets outright on your tax return. We use the method "Depreciation" (pronounces DEE-PREE-SEE-AY-SHON) to spread the tax deduction over a few years

Depreciation (or decline in value) is the way we claim the value of that asset (capital item), over the period of time it is expected to be useful (effective life), rather than all at once in the year it is purchased.

The ATO has an extensive list of how long they consider the effective life of an asset is.

Depreciation applies if the asset is used to earn the income that you pay tax on and includes

• Small and large businesses

• Rental property investors

• Employees (for equipment and tools you provide for use in your work)

Businesses have a higher limit before they must depreciate the assets they have purchased for their business and have other options and rules depending on the size of their businesses and the total of business assets they own.

When we calculate depreciation there are two methods

• Prime cost – where the same amount is claimed each year (after the first part year) i.e. A flat percentage of the original amount &

• Diminishing value – where a percentage is applied to the remainder of what is left of the value from the prior year (closing written down value) so there is a smaller and smaller amount to claim each year.

Assets can also be depreciated in a low-value asset pool (conditions apply) at a usually larger percentage rate of 18.75% in the first year and 37.5% in following years (diminishing value).

Gotax Online makes Depreciation EASY with our simple Depreciation Calculator. 

You can find this inside your tax return

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Note that the information provided is general in nature and subject to change, please contact one of our professionals who can evaluate your circumstances and provide more accurate advice to your current situation.