Guide taxpayers with depreciating assets

1 Guide for taxpayers with depreciating assets Guide to depreciating assets 2019. To help you complete your tax return for 1 July 2018 30 June 2019. Covers deductions you can claim for depreciating assets and other capital expenditure For more information go to NAT OUR COMMITMENT TO YOU. We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and meet your obligations. If you follow our information in this publication and it is either misleading or turns out to be incorrect, and you make a mistake as a result, we must still apply the law correctly. If that means you owe us money, you must pay it but we will not charge you a penalty. Also, if you acted reasonably and in good faith we will not charge you interest.

2 If correcting the mistake means we owe you money, we will pay it and pay you any interest you are entitled to. If you feel that this publication does not fully cover your circumstances, or you are unsure how it applies to you, you can seek further help from us. We have a taxpayers ' Charter which will help you understand what you can expect from us, your rights and obligations and what you can do if you are not satisfied with our decisions, services or actions. For more information, go to and search for taxpayers ' Charter - helping you to get things right'. We regularly revise our publications to take account of any changes to the law, so make sure that you have the latest information. If you are unsure, you can check for more recent information on our website at or contact us.

3 This publication was current at June 2019. AUSTRALIAN TAXATION OFFICE FOR THE PUBLISHED BY. COMMONWEALTH OF AUSTRALIA, 2019. Australian Taxation Office You are free to copy, adapt, modify, transmit and distribute this material as Canberra you wish (but not in any way that suggests the ATO or the Commonwealth June 2019. endorses you or any of your services or products). C319-00001. CONTENTS. About this Guide 2 In-house software 24. Abbreviations used in this publication 2 Common-rate pools 25. Deductions for the cost of depreciating assets 2 depreciating assets and taxation of financial arrangements (TOFA) 25. Uniform capital allowance 2. Primary production depreciating assets 27. What is a depreciating asset ? 3. Capital expenditure deductible under UCA 30.

4 Who can claim deductions for the decline in value of a depreciating asset ? 4 Small business entities 35. Working out decline in value 5 Certain start-up expenses immediately deductible 36. Immediate deduction for certain non business Record keeping 38. depreciating assets (costing $300 or less) 9. Definitions 39. Effective life of depreciating assets 11. Guidelines for using the depreciating assets worksheet 40. The cost of a depreciating asset 14. Guidelines for using the low value pool worksheet 41. What happens if you no longer hold or use a depreciating asset ? 17 Worksheet 1: depreciating assets 42. Low-value pools 22 Worksheet 2: Low-value pool 43. More information inside back cover Guide TO depreciating assets 2019 1. ABOUT THIS Guide DEDUCTIONS FOR THE COST.

5 As a general rule, you can claim deductions for expenses OF depreciating assets . you incurred in gaining or producing your income (for example, Under income tax law, you are allowed to claim certain in carrying on a business) but some expenditure, such as the deductions for expenditure incurred in gaining or producing cost of acquiring capital assets , is generally not deductible. assessable income, for example, in carrying on a business. However, you may be able to claim a deduction for the Some expenditure, such as the cost of acquiring capital decline in value of the cost of capital assets used in gaining assets , is generally not deductible. Generally, the value of a assessable income. capital asset that provides a benefit over a number of years Guide to depreciating assets 2019 explains: declines over its effective life.

6 Because of this, the cost of n how to work out the decline in value of your capital assets used in gaining assessable income can be depreciating assets written off over a period of time as tax deductions. n what happens when you dispose of or stop using Before 1 July 2001, the cost of plant (for example, cars and a depreciating asset , and machinery) and software was written off as depreciation n the deductions you may be able to claim under deductions. uniform capital allowances (UCA) for capital expenditure Since 1 July 2001, UCA apply to most depreciating assets , other than on depreciating assets . including plant. Under UCA, deductions for the cost of a In this Guide , when the words ignoring any GST impact' are depreciating asset are based on the decline in value of the used it should be noted that if you are not entitled to claim an asset .

7 Input tax credit for GST for a depreciating asset that you hold, then the cost of the depreciating asset includes any GST paid. Simplifying tax obligations for business The practice statement Law Administration Practice Statement Who should use this Guide ? PS LA 2003/8 Practical approaches to low-cost business Use this Guide if you bought capital assets to use in gaining or expenses, provides guidance on two straightforward methods producing your assessable income and you would like to claim that you can use if you are carrying on a business to help a deduction for the assets ' decline in value. Also use this Guide determine whether you treat expenditure incurred in acquiring if you incurred other capital expenditure and want to know certain low-cost tangible assets as revenue expenditure or whether you can claim a deduction for the expenditure.

8 Capital expenditure. Subject to certain qualifications, the two methods cover Small business entities expenditure below a threshold and the use of statistical Small business entities may choose to use simplified sampling to estimate total revenue expenditure on low-cost depreciation rules. For more information see Small business tangible assets . The threshold rule allows an immediate entities on page 35. deduction for qualifying low-cost tangible assets costing $100 or less, including any GST. If you have a low-value pool Publications and services (see Low-value pools on page 22), the sampling rule allows you to use statistical sampling to determine the proportion of To find out how to get a publication referred to in this Guide the total purchases on qualifying low-cost tangible assets that and for information about our other services, see the inside is revenue expenditure.

9 Back cover. We will accept a deduction for expenditure incurred on Unfamiliar terms qualifying low-cost tangible assets calculated in accordance with this practice statement. Unfamiliar terms are shown in bold when first used in this Guide . For an explanation of these unfamiliar terms, see Definitions on page 39. UNIFORM CAPITAL ALLOWANCE. UCA provide a set of general rules that apply across a variety ABBREVIATIONS USED IN THIS PUBLICATION of depreciating assets and certain other capital expenditure. UCA do this by consolidating a range of former capital ACT Australian Capital Territory allowance regimes. UCA replace provisions relating to: CGT capital gains tax n plant Commissioner Commissioner of Taxation n software EPA environmental protection activities n mining and quarrying forex foreign exchange n intellectual property GST goods and services tax n forestry roads and timber mill buildings, and n spectrum licences.

10 LCA low-cost asset LVA low-value asset UCA maintain the pre-1 July 2001 treatment of some depreciating assets and capital expenditure such OAV opening adjustable value as certain primary production depreciating assets and TOFA Taxation of financial arrangements capital expenditure. TR Taxation Ruling UCA introduced deductions for some types of capital TV termination value expenditure such as certain business and project-related UCA uniform capital allowances costs; see Capital expenditure deductible under UCA on page 30. 2 Guide TO depreciating assets 2019. You use these rules to work out deductions for the cost of Improvements to land or fixtures on land (for example, your depreciating assets , including those acquired before windmills and fences) may be depreciating assets and are 1 July 2001.