The ATO has published a detailed comparison of the two methods for calculating depreciation deductions under the general depreciation rules: prime cost (straight line) and diminishing value. The guidance, updated for the 2026–27 income year, includes formulas, effective life tables, and examples for each method. Taxpayers choose the method per asset, and the choice is generally irrevocable for that asset.
Key Takeaways
- Prime Cost Method: Deducts an equal amount each year over the asset’s effective life (cost × (100% ÷ effective life)).
- Diminishing Value Method: Deducts a higher amount in early years (base value × (200% ÷ effective life)); base value reduces each year by the deduction claimed.
- Method Choice Impact: Diminishing value provides larger early deductions but smaller later deductions; prime cost provides consistent deductions.
Disclaimer: This article is compiled and summarized by the AI based on publicly available information and is for general information purposes only. It does not constitute any form of formal tax advice, legal opinion, or basis for performance. Please consult a qualified professional tax advisor or legal counsel for tax advice.
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