Guide to depreciating assets 2013 - Australian Taxation Office

Accelerated rates of depreciationYou only use the tables below if you are able to use accelerateddepreciation; see Accelerated depreciation on page 8. You usethe rate that corresponds to the effective life of the item of plant.The following tables show the appropriate rates.For most general items of plant the accelerated rates areas follows (note that the first four categories are unlikely toapply for currently held items as the rates only apply to itemsacquired before 1 July 2001 with an effective life of less thanseven years):Effective life in yearsPrime costrate %Diminishingvalue rate %Less than 3 100 –3 to less than 5 40 605 to less than 6 2 /3 27 406 2 /3 to less than 10 20 3010 to less than 13 17 2513 to less than 30 13 2030 or more 7 10For most cars and motorcycles the following rates apply (notethat the first four categories are unlikely to apply for currentlyheld cars and motorcycles as the rates only apply to itemsacquired before 1 July 2001 with an effective life of less thanseven years):Effective life in yearsPrime costrate %Diminishingvalue rate %Less than 3 100 –3 to less than 5 33 505 to less than 6 2 /3 20 306 2 /3 to less than 10 15 22.510 to less than 13 10 1513 to less than 20 8 11.2520 to less than 40 5 7.540 or more 3 3.75GUIDELINES FOR USING THELOW‐VALUE POOL WORKSHEETThe low-value pool worksheet is on page 40.Description of low-value asset: In this column include a briefdescription of any low-value assets you allocated to the poolfor the current year. A low-value asset is a depreciating asset(other than a horticultural plant) that is not a low-cost assetbut that has an opening adjustable value of less than $1,000worked out using the diminishing value method.Opening adjustable value of low-value asset: Theadjustable value of any depreciating asset at any time is itscost (first and second elements) reduced by any decline invalue up to that time. The opening adjustable value of an assetfor an income year is generally the adjustable value at the endof the previous income year.Taxable use percentage: When you allocate an asset to alow-value pool, you must make a reasonable estimate of thepercentage of your use of the asset that will be for a taxablepurpose over its effective life (for a low-cost asset) or itseffective life remaining at the start of the income year it wasallocated to the pool (for a low-value asset).Reduced opening adjustable value of low-value asset:This is the taxable use percentage of the opening adjustablevalue of any low-value asset you have allocated to the pool forthe income year.Description of low-cost asset or second element of costof asset in pool: In this column include a brief description ofany low-cost assets you allocated to the pool for the incomeyear. A low-cost asset is a depreciating asset (other than ahorticultural plant) whose cost (first and second elements)as at the end of the year in which the start time occurred isless than $1,000. Also show in this column a description ofany amounts included in the second element of cost of anyassets in the pool at the end of the previous year and of anylow-value assets allocated for this year. The second elementof an asset’s cost is capital expenditure on the asset which isincurred after you start to hold it, such as a cost of improvingthe asset; see The cost of a depreciating asset on page 14.Cost of low-cost asset and Second element of cost:Include the cost after you have made any adjustments, suchas for GST input tax credits; see The cost of a depreciatingasset on page 14.Reduced cost of low-cost asset or second element ofcost: This is the taxable use percentage multiplied by:n the cost of each low-cost asset you allocated to the poolfor the income yearn any amounts included in the second element of cost forthe income year for– assets in the pool at the end of the previous year– low-value assets which you allocated to the pool inthe current income year.Balancing adjustment events: Generally, a balancingadjustment event occurs for a depreciating asset if you stopholding it (for example, if you sell it) or you stop using it andyou expect never to use it again; see What happens if youno longer hold or use a depreciating asset? on page 17.Termination value: Generally, the termination value is whatyou receive or are taken to have received for the asset as aresult of a balancing adjustment event, such as the proceedsfrom selling the asset; see Termination value on page 18.Reduced termination value: This is the taxable usepercentage of the asset’s termination value. Use the taxableuse percentage you estimated when you allocated the assetto the pool. This reduced termination value decreases theamount of the closing pool balance. If it exceeds the amountof the closing pool balance, make that balance zero andinclude the excess in assessable income. If you use the assetfor a non-taxable purpose, a capital gain or capital loss mayarise when a balancing adjustment event occurs for the asset;see Balancing adjustment event for a depreciating asset ina low-value pool on page 24.38 ato.gov.au GUIDE TO DEPRECIATING ASSETS 2013