Depreciation Calculator

ATO Depreciation Methods for Australian Businesses

Australian businesses can depreciate most income-producing assets using one of two ATO-approved methods. The prime cost method (also called straight-line) deducts an equal amount each year over the asset's effective life — straightforward to apply and easy to budget for. The diminishing value method accelerates deductions by applying the rate to the asset's remaining book value each year rather than the original cost. This front-loads the tax benefit, which is often advantageous for assets that lose value quickly (such as IT equipment or vehicles).

The ATO publishes effective life tables covering thousands of asset types in Tax Ruling TR 2024/1 (updated annually). Common effective lives include: laptops and computers 4 years, general office furniture 10 years, motor vehicles 8 years, and commercial fit-outs 15–25 years. The first year's depreciation must be pro-rated based on the number of days the asset was held in the financial year ending 30 June — buying an asset in May means you claim only a small fraction in that year. You can also self-assess effective life if you have evidence the ATO table does not reflect your actual circumstances.

For small business entities (SBEs) with an aggregated turnover below AU$10 million, the instant asset write-off allows eligible assets to be fully expensed in the year of purchase rather than depreciated. Thresholds have changed frequently — confirm the current limit with your tax adviser or the ATO website before purchasing assets specifically to access the write-off, as eligibility depends on both the asset cost and the date it was first used or installed ready for use.

How to use this calculator

1. Enter the asset's purchase cost (exclusive of GST if your business is GST-registered).
2. Enter the residual/salvage value if applicable (often nil for most business assets).
3. Select the effective life in years — use the ATO's published table or self-assess.
4. Choose prime cost or diminishing value and review the year-by-year depreciation schedule.

Which method is better — prime cost or diminishing value?

Diminishing value gives you larger deductions in the early years, which is generally preferable from a time-value-of-money perspective — you get the tax benefit sooner. Prime cost is simpler to administer and produces a predictable, even deduction each year. Note that once you choose a method for an asset, you generally cannot switch. Most Australian businesses default to diminishing value for assets likely to depreciate quickly and prime cost for long-life assets like buildings.

Does GST affect the depreciable cost?

Yes. If your business is GST-registered and claims the GST credit on the asset purchase, you depreciate the GST-exclusive cost. If you are not registered for GST (or the asset is used for a non-taxable purpose), you depreciate the full GST-inclusive cost. Using the wrong base is a common error that overstates depreciation deductions.

Can I change the effective life of an asset?

You can self-assess effective life when you first start depreciating an asset, or recalculate it in a later year if circumstances change — for example, if the asset is used more intensively than expected or has been damaged. You cannot use self-assessment to extend effective life simply to reduce annual deductions. The ATO can also issue a determination overriding a self-assessed life if it believes the figure is unreasonable.

What happens to depreciation when I sell an asset?

When you dispose of a depreciating asset, you calculate a balancing adjustment. If the termination value (sale proceeds) exceeds the remaining book value, the difference is included in assessable income. If the book value exceeds proceeds, you get a deduction for the shortfall. This prevents you from claiming more than the actual economic cost of the asset.

Effective life figures and instant asset write-off thresholds are based on ATO published guidance and change periodically. Always confirm current rates and eligibility at ato.gov.au or with a registered tax agent before making purchasing decisions.