Question 1

What is the difference between prime cost and diminishing value?

Accepted Answer

Prime cost (straight line) spreads the deduction evenly over the asset's effective life. Diminishing value applies a higher percentage to the remaining value each year, giving larger deductions in the early years. The diminishing value rate is calculated as 200% divided by the effective life in years.

Question 2

How does the ATO determine effective life?

Accepted Answer

The ATO publishes a table of effective lives for common assets in Taxation Ruling TR 2024/3. You can use the ATO's determination or self-assess a different effective life if you can demonstrate your circumstances differ. Common examples: computers (4 years), office furniture (10-15 years), motor vehicles (8 years).

Question 3

What is the instant asset write-off for small businesses?

Accepted Answer

For small businesses (aggregated turnover under $10 million), the instant asset write-off allows you to immediately deduct the full cost of eligible assets costing less than $20,000 each. This $20,000 threshold is set to expire on June 30, 2026, and will revert to just $1,000 unless further legislation is passed. Assets costing $20,000 or more are added to the small business depreciation pool instead. Industry groups are lobbying for a permanent increase (up to $150,000), but no extension has been confirmed. Businesses should prioritize eligible purchases before the June 30, 2026 deadline.

Question 4

Can I claim depreciation on a work vehicle in Australia?

Accepted Answer

Yes, but the car cost limit applies. For 2024-25, the car limit is $69,674. You can only claim depreciation on costs up to this limit, regardless of what you paid. This limit applies per car and covers the GST-inclusive cost. The car limit does not apply to vehicles that are not designed to carry passengers.

Question 5

What is the small business depreciation pool?

Accepted Answer

Small businesses can add assets costing $20,000 or more to a depreciation pool instead of tracking each asset individually. The pool is depreciated at 15% in the first year and 30% each subsequent year using the diminishing value method. This simplifies record-keeping significantly.

Australia (ATO)

Frequently Asked Questions

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Australia (ATO)

Frequently Asked Questions

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Australia (ATO)

Frequently Asked Questions

1What is the difference between prime cost and diminishing value?

2How does the ATO determine effective life?

3What is the instant asset write-off for small businesses?

4Can I claim depreciation on a work vehicle in Australia?

5What is the small business depreciation pool?

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Australia (ATO)

Frequently Asked Questions

1What is the difference between prime cost and diminishing value?

2How does the ATO determine effective life?

3What is the instant asset write-off for small businesses?

4Can I claim depreciation on a work vehicle in Australia?

5What is the small business depreciation pool?

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