Depreciation

=Prime cost and diminishing value methods = https://www.ato.gov.au/Business/Income-and-deductions-for-business/Depreciating-assets/General-depreciation-rules/Prime-cost-and-diminishing-value-methods/

= Prime cost and diminishing value methods = You have two methods to calculate the effective-life depreciation of an asset. > The prime cost method assumes the value of a depreciating asset decreases at the same rate over its effective life. > The diminishing value method assumes the value of a depreciating asset decreases more in the early years of its effective life. > > This graph compares the amount you would claim under each method for the depreciation of an asset used only for business. The asset in this example costs $80,000 and has an effective life of five years. > == Prime cost method == Using the prime cost method, you claim a fixed amount each year. > The following formula is used for the prime cost method: > Asset’s cost × (days held/365) × (100%/asset’s effective life) > Example > If the asset costs $80,000 (after excluding GST if entitled to claim it) and has an effective life of five years, you can claim 20% of its cost, or $16,000, in each of the five years. > The cost includes the amount you paid for the asset as well as any additional amounts paid for transport, installation or making it ready to use. > The calculation is: > $80,000 x (365/365) ×20% = $16,000 > End of example == Diminishing value method == Use the following formula for the diminishing value method for eligible depreciating assets you started to hold on or after 10 May 2006: > Base value × (days held/365) × (200%/asset’s effective life) > Example > If the asset cost $80,000 and has an effective life of five years, the claim for the first year will be: > $80,000 × (365/365) × (200%/5) = $80,000 x 40% = $32,000 > The cost includes the amount you paid for the asset (excluding GST if entitled to claim it) as well as any additional amounts paid for transport, installation or making it ready to use. > The base value reduces each year by the decline in the value of the asset. This means the base value for the second year will be $48,000 ($80,000 minus the $32,000 decline in value in the first year). > The claim for the second year will be: > $48,000 × (365/365) × (200%/5) = $48,000 x 40% = $19,200 > In the third year, the base value will be $28,800 and the claim will be $11,520. > In the fourth year, the base value will be $17,280 and the claim will be $6,912. > This will continue until the value reaches zero. > End of example Use the following formula for depreciating assets you started to hold before 10 May 2006: > Base value x (days held/365) x (150%/asset's effective life) > Once the value of the asset falls below $1,000, you can transfer its remaining value to a low-value pool. You can then claim depreciation for the asset together with other low-value assets, rather than making separate calculations for each. > See also:
 * [|Guide to depreciating assets]
 * [|Uniform capital allowance system: calculating the decline in value of a depreciating asset]

Last modified: 30 Aug 2016

https://atotaxrates.info/tax-deductions/ato-depreciation/depreciation-of-computers/

News Jan 2016: The ATO’s Effective Life estimates for computers and 3D printers is under review, applying from 1 July 2016. The tax deduction may be for depreciation, with costs allocated over the year(s) of computer’s effective life, or in full if one of the accelerated claim methods can be used (see below).

Computers Depreciation
The current Effective Life estimates for computers under Table B are: > Under the depreciation formula, this converts to a Diminishing Value percentage rate of 50% per annum or Prime Cost 25% > Under the depreciation formula, this converts to a Diminishing Value percentage rate of 66.67% or Prime Cost 33.33% Low-cost and Low-value assets (less than $1,000) can be pooled and depreciated at 18.75% in the year of acquisition, 37.5% subsequent years under the diminishing value method – see also $20,000 threshold for accelerated small business depreciation claims and ATO Depreciation.
 * **Computers – effective life of 4 years**
 * **Laptops – effective life of 3 years**

Employees – Work-related expenses
Employees can claim their computer costs to the extent that they directly relate to the earning income from their employment. All non-business taxpayers can claim a full deduction if the computer (or laptop or software) costs no more than $300. Where the cost is more than $300 then the depreciation formula must be used to calculate the percentage tax deductible amount. <span style="background-color: #ffffff; color: #333333; font-family: 'PT Sans',sans-serif; font-size: 1.8rem;">Small claims can be included in the $300 minor expenses limit for which written evidence is not required. Otherwise – as is more often the case given the relatively high cost of computers – evidence of expenditure, usually in the form of receipts, and a record of work-related use (such as a diary) will normally be required to support a claim. <span style="background-color: #ffffff; color: #333333; font-family: 'PT Sans',sans-serif; font-size: 1.8rem;">Such work-related claims, also encompass deductions for associated expenses such as internet usage, loan interest (on the purchase cost) and repairs.

<span style="background-color: #ffffff; color: #333333; font-family: 'PT Sans',sans-serif; font-size: 2.8rem;">Computer tax depreciation claims for business and generally
<span style="background-color: #ffffff; color: #333333; font-family: 'PT Sans',sans-serif; font-size: 1.8rem;">As assets which decline in value over time, claims for computers are dealt with in a number of possible ways, with possible choices available under several depreciation categories. <span style="background-color: #ffffff; color: #333333; font-family: 'PT Sans',sans-serif; font-size: 1.8rem;">**Choices include:**
 * <span style="background-color: #ffffff; color: #333333; font-family: 'PT Sans'; font-family: 'PT Sans',sans-serif; font-size: 1.8rem; font-size: 16px;">You can choose to self-assess the effective life of the computer, which determines what percentage of the cost is claimable under either the Diminishing Value or Prime Cost calculation methods.
 * <span style="background-color: #ffffff; color: #333333; font-family: 'PT Sans'; font-family: 'PT Sans',sans-serif; font-size: 1.8rem; font-size: 16px;">You can alternatively choose to use the Commissioner’s estimate of Effective Life (see above), which is revised and published annually by the Tax Office. The Effective Life in years determines the percentage of cost to claim under either the Diminishing Value or Prime Cost calculation methods.

<span style="background-color: #ffffff; color: #333333; font-family: 'PT Sans',sans-serif; font-size: 2.8rem;">** Small Business Entities **
<span style="background-color: #ffffff; color: #333333; font-family: 'PT Sans',sans-serif; font-size: 1.8rem;">Small Business Entities – basically those carrying on business with an aggregated business turnover of less than $2 million per annum – may claim for depreciation as
 * <span style="background-color: #ffffff; color: #333333; font-family: 'PT Sans'; font-family: 'PT Sans',sans-serif; font-size: 1.8rem; font-size: 16px;">an immediate deduction for assets costing less than $1,000 (this limit rising to $6,500 for the period 1 July 2012 to 31 December 2013); and up to $20,000 from 7.30pm (AEST) 12 May 2015 until 30 June 2017
 * <span style="background-color: #ffffff; color: #333333; font-family: 'PT Sans'; font-family: 'PT Sans',sans-serif; font-size: 1.8rem; font-size: 16px;">pooling of assets to be depreciated at 15% in the year of acquisition, and 30% ongoing.

<span style="background-color: #ffffff; color: #333333; font-family: 'PT Sans',sans-serif; font-size: 2.8rem;">Further information:

 * Guide to depreciating assets
 * Effective Life conversion calculator
 * <span style="background-color: #ffffff; color: #333333; font-family: 'PT Sans'; font-family: 'PT Sans',sans-serif; font-size: 1.8rem; font-size: 16px;">** Tax Commissioner’s Effective Life tables

Low value pool depreciation:

https://www.ato.gov.au/Forms/Guide-to-depreciating-assets-2014-15/?page=13

<span style="background-color: whitesmoke; color: #666666; display: block; font-family: Swiss721BT-Light,Arial,Helvetica,sans-serif; font-size: 18px;"> <span style="font-family: Swiss721BT-Bold,Arial,Helvetica,sans-serif;">Example: Working out the decline in value of depreciating assets in a low-value pool, ignoring any GST impact During the 2014–15 income year, John bought a printer for $990. John allocated low-cost assets to a low-value pool in the 2013–14 income year so he had to allocate the printer to the pool because it too was a low-cost asset. He estimated that only 60% of its use would be for taxable purposes. He therefore allocated only 60% of the cost of the printer to the pool, that is, $594. Assume that at the end of the 2013–14 income year, John’s low-value pool had a closing pool balance of $5,000. Also assume that John did not allocate any other low-cost or low-value assets to the pool for the 2014–15 income year. John’s deduction for the decline in value of the assets in the pool for the 2014–15 income year would be $1,986. This is worked out as follows: > (18.75% x $594) || $111 || > (37.5% x $5,000) || $1,875 ||
 * * 18.75% of the taxable use percentage of the cost of the printer allocated to the pool during the year
 * * plus 37.5% of the closing pool balance for the previous year

End of example <span style="background-color: #ffffff; color: #666666; font-family: Swiss721BT-Light,Arial,Helvetica,sans-serif; font-size: 18px;">The <span style="font-family: Swiss721BT-Bold,Arial,Helvetica,sans-serif;">closing balance of a low-value pool for an income year is: > <span style="font-family: Swiss721BT-Bold,Arial,Helvetica,sans-serif;">plus > <span style="font-family: Swiss721BT-Bold,Arial,Helvetica,sans-serif;">plus > <span style="font-family: Swiss721BT-Bold,Arial,Helvetica,sans-serif;">plus <span style="background-color: whitesmoke; color: #666666; display: block; font-family: Swiss721BT-Light,Arial,Helvetica,sans-serif; font-size: 18px;"> <span style="font-family: Swiss721BT-Bold,Arial,Helvetica,sans-serif;">Example: Working out the closing balance of a low-value pool, ignoring any GST impact Following on from the previous example, and assuming that John made no additional allocations to or reductions from his low-value pool, the closing balance of the pool for the 2014–15 income year would be $3,608:
 * <span style="background-color: #ffffff; color: #666666; font-family: Swiss721BT-Light,Arial,Helvetica,sans-serif; font-size: 18px;">the closing pool balance for the previous income year
 * <span style="background-color: #ffffff; color: #666666; font-family: Swiss721BT-Light,Arial,Helvetica,sans-serif; font-size: 18px;">the taxable use percentage of the cost (first and second elements) of any low-cost assets allocated to the pool for the income year
 * <span style="background-color: #ffffff; color: #666666; font-family: Swiss721BT-Light,Arial,Helvetica,sans-serif; font-size: 18px;">the taxable use percentage of the opening adjustable value of low-value assets allocated to the pool for the income year
 * <span style="background-color: #ffffff; color: #666666; font-family: Swiss721BT-Light,Arial,Helvetica,sans-serif; font-size: 18px;">the taxable use percentage of any amounts included in the second element of cost for the income year of
 * assets in the pool at the end of the previous income year, and
 * low-value assets allocated for the income year
 * <span style="font-family: Swiss721BT-Bold,Arial,Helvetica,sans-serif;">less
 * <span style="background-color: #ffffff; color: #666666; font-family: Swiss721BT-Light,Arial,Helvetica,sans-serif; font-size: 18px;">the decline in value of the assets in the pool for the income year.
 * * Closing pool balance for the 2013–14 income year || $5,000 ||
 * * plus the taxable percentage of the cost of the printer || $594 ||
 * * less the decline in value of the assets in the pool for the income year || ($1,986) ||

Balance adjustment of low value pool <span style="color: #666666; font-family: Swiss721BT-Light,Arial,Helvetica,sans-serif; font-size: 18px;"><span style="font-family: Swiss721BT-Bold,Arial,Helvetica,sans-serif;">Example: Disposal of a depreciating asset in a low-value pool, ignoring any GST impact <span style="color: #666666; font-family: Swiss721BT-Light,Arial,Helvetica,sans-serif; font-size: 18px;">Following on from the previous examples, during the 2015–16 income year John sells the printer for $500. Because he originally estimated that the printer would only be used 60% for taxable purposes, the closing balance of the pool is reduced by 60% of the termination value of $500, that is, $300. <span style="color: #666666; font-family: Swiss721BT-Light,Arial,Helvetica,sans-serif; font-size: 18px;">A capital loss of $196 also arises. As the printer’s taxable use percentage is 60%, 40% of the difference between the asset’s cost ($990) and its termination value ($500) is treated as a capital loss. <span style="color: #666666; font-family: Swiss721BT-Light,Arial,Helvetica,sans-serif; font-size: 18px;">Assuming that John made no additional allocations to or reductions from his low-value pool, the closing balance of the pool for the 2015–16 income year is $1,955:
 * Closing pool balance for the 2014–15 income year || $3,608 ||
 * less the decline in value of the assets in the pool for the year (37.5% x $3,608) || ($1,353) ||
 * less the taxable use percentage of the termination value of pooled assets that were disposed of during the year || ($300) ||