Calculate asset depreciation using ATO-compliant methods
Track asset values and calculate annual depreciation deductions for tax purposes. Search our comprehensive database of ATO effective life rates.
Depreciation is a tax deduction for the decline in value of business assets over time. Rather than claiming the full cost upfront, you spread the deduction over the asset's effective life as determined by the ATO. This applies to assets costing $300 or more.
The ATO allows two depreciation methods: Prime Cost (straight-line) and Diminishing Value (accelerated). Your choice affects how much you can claim each year and your cashflow timing.
Instant Asset Write-Off
For eligible small businesses (turnover <$10M), assets under the threshold can be immediately deducted in full. Check current threshold as it changes with government policy.
| Feature | Prime Cost Method | Diminishing Value Method |
|---|---|---|
| How It Works | Equal deduction each year (straight-line) | Higher deduction in early years, decreases over time |
| Formula | Asset Cost ÷ Effective Life (years) | Written Down Value × (200% ÷ Effective Life) |
| Year 1 Deduction | Lower | Higher (2x Prime Cost rate) |
| Predictability | Same amount each year (easy to forecast) | Decreases annually (harder to forecast) |
| Cashflow Impact | Steady deductions spread evenly | Front-loaded deductions (better short-term cashflow) |
| Best For | Assets you'll keep for full effective life | Assets you may upgrade/sell early |
| Example | $10,000 asset, 5yr life = $2,000/year for 5 years | $10,000 asset, 5yr life = $4,000 yr1, $2,400 yr2, $1,440 yr3... |
Once you choose a method for an asset, you must continue using that method unless you change the asset's use (e.g., from personal to business).
Asset: $2,500 laptop purchased July 1, 2024
Effective Life: 2 years (ATO standard for computers)
Use: 100% business
Note: With 100% DV rate, full cost is claimed immediately. DV preferred for technology that depreciates quickly.
Asset: $1,800 oven purchased October 15, 2024
Effective Life: 12 years (ATO standard for ovens)
Use: Rental property (100% income-producing)
Purchased mid-year so must prorate first year. DV gives slightly higher deduction over first few years.
Asset: $8,000 work trailer purchased March 1, 2025
Effective Life: 8 years (ATO standard for trailers)
Use: 80% business, 20% private
Must apportion for private use (20% not claimable). Keep logbook for 12 weeks to substantiate business %.
Asset: $15,000 equipment purchased June 1, 2025
Business Turnover: $5M (qualifies for instant write-off)
Threshold: Assume $20,000 threshold applies
Check ATO website for current threshold amount as government policy changes. Small business pooling is alternative if threshold not met.
| Asset Type | Effective Life | Common Examples |
|---|---|---|
| Computers | 2 years | Laptops, desktops, tablets |
| Office Furniture | 10-13 years | Desks, chairs, filing cabinets |
| Motor Vehicles | 8 years | Cars, utes, vans (non-luxury) |
| Tools | 4-10 years | Power tools, hand tools (varies by type) |
| Rental Property Appliances | 6-12 years | Ovens, dishwashers, fridges |
| Air Conditioning | 10-20 years | Split systems, ducted (varies by type) |
| Building Capital Works | 40 years | Rental property construction (post-1985) |
These are ATO standard effective lives. You can self-assess a shorter life if you can demonstrate the asset will wear out faster due to intensive use or harsh conditions.
Generally no, unless the asset's use changes (e.g., from personal to business or vice versa). Once you choose Prime Cost or Diminishing Value, you must continue with that method for the asset's life.
Use the remaining effective life, not the original. For example, if a 5-year laptop was purchased 2 years old, you depreciate it over the remaining 3 years. If you can't determine age, the ATO allows you to use 2/3 of the standard effective life.
Yes! Depreciation is based on the asset's decline in value, not loan repayments. You continue claiming depreciation regardless of whether you've paid off the purchase price, as long as the asset is still used for income-producing purposes.
If you sell for more than the written-down value (cost minus accumulated depreciation), the difference is assessable income (balancing adjustment). If you sell for less, you can claim the loss. This prevents you from claiming too much depreciation.
This depreciation calculator helps you:
Tip: For assets you plan to upgrade frequently (like tech), Diminishing Value usually gives better cashflow. For long-term assets (like rental property fixtures), Prime Cost provides predictable deductions.
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