Claiming the costs of depreciating assets
As a small business, it’s important to know about depreciating assets, for tax reasons. This can help you when you’re organising your tax records, submitting your yearly tax return, or purchasing a new asset.
What is an asset?
An asset is anything that provides value and is owned by your business. It can be:
- tangible (something you can touch and see) such as a building or equipment
- intangible (something you can’t touch or see but that is still valuable) such as the reputation or the goodwill of your business.
What is a depreciating asset?
A depreciating asset is an asset that:
- declines in value over time
- has a limited useful life.
According to the Australian Taxation Office (ATO):
- Items such as computers, electrical tools, furniture, curtains, carpets and cars are depreciating assets.
- Land and trading stock are not depreciating assets.
Claiming depreciation costs
You can claim the depreciation (the decline in value) of most assets as a tax deduction in your tax return, as long as you use them for business purposes.
When claiming depreciation costs, you can use:
general depreciation ruleswhere the amount of depreciation you can claim will depend on the life of the asset and the depreciation method you choose
simplified depreciation rules
which can be used by businesses with a turnover of less than:
- $10 million from 1 July 2016 onwards
- $2 million for previous income years.
If using the simplified depreciation rules, if you purchased assets from 7.30pm (AEST) on 12 May 2015 and first used or installed them ready for use:
- from 7.30pm (AEST) on 12 May 2015 until 28 January 2019, you can immediately deduct the business portion of most depreciating assets costing less than $20,000 each.
- from 29 January 2019 until before 7.30pm (AEDT) 2 April 2019, you can immediately deduct the business portion of most depreciating assets costing less than $25,000 each.
- from 7.30pm (AEDT) on 2 April 2019 until 30 June 2020, you can immediately deduct the business portion of most depreciating assets costing less than $30,000 each.
See simpler depreciation for small business on the ATO website for more information.
Find out more
- Find out more about tax deductions.
- Read about the general depreciation rules that you can use if your business turnover is $2 million or more.
- Check out the ATO’s depreciating assets tool for more detail about claiming the costs of depreciating assets.
- Remember that the information we’ve provided here is to help you gain a general understanding of accelerated depreciation. To talk to someone about your particular circumstances, contact your accountant or business advisor, or call the ATO on 13 28 66.