Guidelines for using the depreciating assets worksheet

The depreciating assets worksheet

Primary production only and Non-primary production only: Use a separate worksheet for each category.

Cost: The cost of a depreciating asset includes the first and second elements of cost. You must adjust the cost of an asset in certain circumstances, such as when the first element of a car’s cost exceeds the car limit. If you have adjusted the cost of the asset, include the adjusted cost in this column; see The cost of a depreciating asset.

Opening adjustable value and Adjustable value at end of year: The adjustable value of a depreciating asset at any time is its cost reduced by any decline in value up to that time. The opening adjustable value of an asset for an income year is generally the same as its adjustable value at the end of the previous income year.

Balancing adjustment events: Generally, a balancing adjustment event occurs for a depreciating asset when you stop holding it (for example, if you sell it) or when you stop using it and you expect never to use it again; see What happens if you no longer hold or use a depreciating asset?

Termination value: Generally, the termination value is what you receive or are taken to have received for the asset as a result of a balancing adjustment event, such as the proceeds from selling the asset; see Termination value.

Balancing adjustment amounts: If the asset’s termination value is greater than its adjustable value, the excess is generally an assessable balancing adjustment amount. If the termination value is less than the adjustable value, the difference is a deductible balancing adjustment amount. If you use the asset for a non-taxable purpose, you reduce the balancing adjustment amount and a capital gain or capital loss may arise; see Depreciating asset used for a non-taxable purpose.

Balancing adjustment relief: This refers to the offsetting of otherwise assessable balancing adjustment amounts for involuntary disposals (see Involuntary disposal of a depreciating asset) or when rollover relief applies; see Rollover relief.

Decline in value: There are two methods of working out the decline in value of a depreciating asset, prime cost and diminishing value; see Methods of working out decline in value.

Effective life and Percentage rate: Both the prime cost and diminishing value methods are based on a depreciating asset’s effective life; see Effective life. However, if you are able to use accelerated rates of depreciation (see Accelerated depreciation) you use the relevant percentage rate to work out the decline in value rather than the effective life.

A list of accelerated rates is provided; see Accelerated rates of depreciation.

Taxable use percentage: This is the proportion of your use of a particular depreciating asset for a taxable purpose.

Deduction for decline in value: Your deduction for the decline in value of the asset is the decline in value reduced to the extent you used the asset for a non-taxable purpose; see Decline in value of a depreciating asset used for a non-taxable purpose. Your deduction may also be reduced if the asset is a leisure facility or a boat.

Examples of effective lives from Taxation Ruling TR 2012/2 (from 1 July 2012)

Depreciating asset	Effective life in years
Carpets
in commercial office buildings	8
in ten-pin bowling centres	4
Computers
generally	4
laptops	3
Curtains and drapes	6
Fire extinguishers	15
Hot water installations for commercial office buildings (excluding commercial boilers and piping)	15
Lawn mower
motor	6 2/3
self-propelled	5
Library (professional)	10
Motor vehicles
cars generally	8
hire and travellers’ cars	5
taxis	4
motorcycles and scooters	6 2/3
Office machines and equipment
photocopying machines	5
Point of sale assets
cash registers, stand-alone type	10
Power tools (hand operated, air or electric)	5
Power tools (hand operated, battery)	3
Television receivers
generally	10
Tools (loose)	5
Vacuum cleaners (electric)	10

Accelerated rates of depreciation

You only use the tables below if you are able to use accelerated depreciation; see Accelerated depreciation. You use the 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 are as follows (note that the first four categories are unlikely to apply for currently held items as the rates only apply to items acquired before 1 July 2001 with an effective life of less than seven years):

Effective life in years	Prime cost rate %	Diminishing value rate %
Less than 3	100	–
3 to less than 5	40	60
5 to less than 6 2/3	27	40
6 2/3 to less than 10	20	30
10 to less than 13	17	25
13 to less than 30	13	20
30 or more	7	10

For most cars and motorcycles the following rates apply (note that the first four categories are unlikely to apply for currently held cars and motorcycles as the rates only apply to items acquired before 1 July 2001 with an effective life of less than seven years):

Effective life in years	Prime cost rate %	Diminishing value rate %
Less than 3	100	–
3 to less than 5	33	50
5 to less than 6 2/3	20	30
6 2/3 to less than 10	15	22.5
10 to less than 13	10	15
13 to less than 20	8	11.25
20 to less than 40	5	7.5
40 or more	3	3.75