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29 Jun 11 Effective life of depreciating assets from 1 July 2011 – TR 2011/2

On 29 June 2011 the ATO released a major new taxation ruling which discusses the methodology used by the Commissioner in making determinations of the effective life of depreciating assets under s 40-100 ITAA 1997, and has effect from 1 July 2011: Taxation Ruling TR 2011/2.

This ruling replaces Taxation Ruling TR 2010/2, which is withdrawn on and from 1 July 2011. To the extent that the Commissioner’s views in that ruling still apply, they have been incorporated into this ruling.

Determinations of the effective life of depreciating assets made by the Commissioner are reproduced in the ruling. These determinations are not appropriate to calculate capital works deductions for depreciating assets that qualify for Division 43, deductions for which are worked out by the method specified in that Division.

Taxpayers may choose to use the Commissioner’s determination of the effective life of a depreciating asset or may make their own estimate (see s 40-95). The explanation of the methodology used by the Commissioner in making determinations of effective life provided in this ruling may assist taxpayers who choose to make their own estimate of the effective life for a depreciating asset.

The Commissioner’s determination of the effective life of depreciating assets has been amended with effect from 1 July 2011. For ease of reference, the ATO has prepared a consolidated version of the amended determination which is set out in the Schedule to this ruling. If, for a particular asset, a taxpayer was using an effective life from the determination as in force before the latest amendment (for example, as contained in the Schedule to TR 2010/2), the taxpayer should continue to use that life for that asset. The date a determination comes into force is set out in the ruling.