The effective life assessment methodology outlined by the Tax Office is worth studying in full, if you are considering going down that road. The following is an extracted non-exhaustive list of relevant factors to consider when making an effective life determination.
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Buses with a gross vehicle mass of more than 3.5 tonnes. 15 years. 7.5 years. Garbage compactor trucks (including the compactor) 10 years. 7.5 years The effective life is used to work out the asset’s decline in value (or depreciation) for which an income tax deduction can be claimed. For most depreciating assets, you can use the ATO's determinations of effective life, published in taxation rulings (updated annually).
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The following is a list of effective life reviews that have been completed, including the date of effect of the new effective lives. Alumina manufacturing (including bauxite refining and calcined alumina manufacturing) Automotive body, paint and interior repairing – car wash, detailing and smash repair assets.
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This however does not remove the option to self-assess effective life as an alternative. How to check or find capped effective life assets
A business vehicle’s effective life. General depreciation rules require a determination of the effective life of a vehicle in order to calculate either prime cost or diminishing value methods. To work this out, you can use one of the following: ATO determination: A standardised rate set by the ATO and published annually in taxation rulings. Also, a good news is that I found the ATO Depreciation and capital allowances tool does allow to enter a "recalculated effetcive life year", which allows me to use 8 years as the effective life for the first 3 years and use 5 years for remaining years untill it is fully depreciated. The ATO makes its determination of effective life for different kinds of assets after research into how long it will take for them to wear out according to an assumed usage level.
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If you buy a second-hand asset whose condition indicates a shorter life, then you can choose to take that into account by means of a self assessment.
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