On 25 June 2014 the ATO issued a taxation ruling on effective lives of depreciating assets, effective for the year beginning 1 July 2014: taxation ruling TR 2014/4 "Income tax: effective life of depreciating assets (applicable from 1 July 2014)".
The ruling discusses the methodology used by the Commissioner in making a determination of the effective life of depreciating assets under s 40-100 of the Income Tax Assessment Act 1997.
Determinations made by the Commissioner of the effective life of depreciating assets apply for the purposes of provisions of Division 40 under which the effective life of a depreciating asset is used to work out the asset’s decline in value. The effective life determination is made having regard to the period the depreciating asset can be used for a purpose specified in s 40-100(5), one of which is use for a taxable purpose. To the extent that the asset is used for a taxable purpose, a deduction may be available under Division 40 for the depreciating asset’s decline in value (see s 40-25).
Effective life determinations made to date are consolidated in Tables A and B in the Schedule to the ruling.
Taxpayers may choose to use the Commissioner’s determination of the effective life of a depreciating asset or may make their own estimates (see s 40-95). The explanation provided in this ruling of the methodology used by the Commissioner in making a determination of effective life may assist taxpayers who choose to make their own estimate of the effective life of a depreciating asset.
This ruling replaces TR 2013/4, which is withdrawn from 1 July 2014: notice of withdrawal TR 2013/4W.
To the extent that the Commissioner’s views in that ruling still apply, they have been incorporated into this ruling.