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 rules

    where 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.

What to do…


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