Effective lives are used by taxpayers to work out a deduction for an asset’s decline in value (depreciation deduction).

The purpose of the review, according to the ATO, is to ensure that the Commissioner’s effective life determinations cover all of the assets commonly used today, and reflect current industry practices and expectations.

The Commissioner’s determinations operate as a ‘safe harbour’ for taxpayers.

The option of self-assessing effective lives is also available.

The review will cover all vessels and accessories, and the ATO believes that they may be able to provide a set of generic lives for boats that can be used by the various sectors.

The ATO has also announced it expects its review of these assets to be completed within 12 months, with new effective life determinations applying from 1st July 2009.

Draft effective lives will be issued for public comment well before final decisions are made.
For this review, the ATO will do three things, it explained. Namely:

• Identify the depreciating assets that are widely used;
• Establish the period of time that each asset can reasonably be expected to be used for a taxable purpose; and
• Recommend to the Commissioner of Taxation that he make new effective life determinations for the assets we have identified.