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Australia Clarifies Effective Life Of Depreciable Assets

by Mary Swire, Tax-News.com, Hong Kong

16 July 2019


The Australian Taxation Office has released a new ruling on how to calculate the effective life of depreciating assets for income tax purposes, in Taxation Ruling (TR) 2019/5, which is applicable from July 1, 2019.

The Ruling explains the methodology used by the Commissioner of Taxation to make a determination of the effective life of depreciating assets under Section 40-100 of the Income Tax Assessment Act 1997 (ITAA 1997).

The effective life of a depreciating asset is used to work out the asset's decline in value (depreciation for income tax purposes). The Commissioner makes the effective life determination having regard to the period the depreciating asset can be used for a purpose specified in Subsection 40-100(5), one of which is use for a taxable purpose. A deduction may be available under Division 40 for the depreciating asset's decline in value, to the extent that the asset is used for a taxable purpose.

The TR lists the effective life determinations that have been made to date. Taxpayers can either choose to use the Commissioner's determination of the effective life of a depreciating asset or make their own estimate. The TR is intended to support taxpayers and their agents to make their own determinations effectively.

The TR replaces an earlier ruling on the same from July 1, 2018, TR 2018/4.

TAGS: tax | accounting | Australia | Tax

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