Document ID: chunk:federal_register_of_legislation:C2025C00029:section:1
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 1
Character Range: 839444–843366

1                                    Rules about depreciating assets
1.1                                  Core provisions                                                                                                                                                                                                                                                                               Subdivision 40‑B
                                     Depreciating assets are assets with a limited effective life that are reasonably expected to decline in value.
                                     Broadly, the effective life of a depreciating asset is the period it can be used to produce income.
                                     The decline in value is based on the cost and effective life of the depreciating asset, not its actual change in value. It begins at start time, when you begin to use the asset (or when you have it installed ready for use). It continues while you use the asset (or have it installed).
                                     Usually, the owner of a depreciating asset holds the asset and can therefore claim deductions for its decline in value. Sometimes the economic owner will be different to the legal owner and the economic owner will be the holder.
1.2                                  Cost                                                                                                                                                                                                                                                                                          Subdivision 40‑C
                                     The cost of a depreciating asset includes both:
                                         * expenses you incur to start holding the asset; and
                                         * additional expenses that contribute to its present condition and location (e.g. improvements).
1.3                                  Balancing adjustments                                                                                                                                                                                                                                                                         Subdivision 40‑D
                                     When you stop holding a depreciating asset you may have to include an amount in your assessable income, or deduct an amount under a balancing adjustment. The adjustment reconciles the decline with the actual change in value.
1.4                                  Low‑value and software development pools                                                                                                                                                                                                                                                      Subdivision 40‑E
                                     Low‑cost assets and assets depreciated to a low value may be placed in a low value pool, which is treated as a single depreciating asset. You can also pool in‑house software expenditure in a software development pool.
1.5                                  Primary production depreciating assets                                                                                                                                                                                                                                                        Subdivision 40‑F
                                     You can deduct amounts for capital expenditure on:
                                         * water facilities immediately; or
                                         * horticultural plants over a period that relates to the effective life of the plant; or
                                         * fodder storage assets immediately; or
                                         * fencing assets immediately.