background image

ATO Publishes Taxation Ruling on Effective Life of Depreciating Assets — Orbitax Tax News & Alerts

The Australian Taxation Office (ATO) has published Taxation Ruling (TR) 2020/3 - Income tax: effective life of depreciating assets, which is effective from 1 July 2020 and replaces Taxation Ruling (TR) 2019/5.

Under Australian depreciation rules, taxpayers may choose to use the Commissioner's determination of the effective life of a depreciating asset as included in tables A and B of TR 2020/3 or choose to make their own estimate. Table A lists the effective life for industry-specific assets and Table B lists the effective life for assets in general.

For the use of the listed effective lives, if a depreciating asset is first used or installed ready for use within five years of entering into the contract to acquire the asset, beginning construction of the asset, or otherwise acquiring the asset (relevant time), then the effective life is that which was in force at the relevant time. If an asset is not used or installed ready for use within five years, then the effective life is that which was in force at the time of first use or installed ready for use.