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The effective life of an asset is the period that the asset can be used by anyone for income producing purposes. The decline in value of a depreciating asset is worked out using the asset's effective life.
Taxpayers claiming depreciation have a choice of determining effective life from a process of self-assessment, or by using a Tax Office schedule (Commissioner’s effective life schedules). Capped effective lives are shorter than the effective life determined by the Commissioner’s regular determination process, and must be used when the Commissioner’s effective life method is selected. This however does not remove the option to self-assess as an alternative.
The Commissioner's effective life schedules and the capped effective life of the depreciating assets affected by these statutory caps are compared in the table below. Therefore, if you choose to use the Commissioner's schedules, you must use the capped effective life as set out in the table.
|Depreciating asset||Commissioner’s effective life schedules||Capped effective life|
|Buses with a gross vehicle mass of more than 3.5 tonnes||15 year||7.5 years|
|Garbage compactor trucks||10 years||7.5 years|
|Light commercial vehicles with a carrying capacity of one tonne or greater and a gross vehicle mass of 3.5 tonnes or less||12 years||7.5 years|
|Minibuses with a gross vehicle mass of 3.5 tonnes or less and seats for 9 or more passengers||12 years||7.5 years|
|Trailers with a gross vehicle mass greater than 4.5 tonnes||15 year||10 years|
|Trucks having a gross vehicle mass greater than 3.5 tonnes||15 years||7.5 years|