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WHAT ARE THE GENERAL DEPRECIATION RULES FOR CAPITAL ALLOWANCES?

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24
May

You usually apply the general depreciation rule when you want to calculate the depreciation deduction for most of your assets. The general depreciation rules help you to calculate the amount that can be claimed depending on the asset’s effective life. To calculate depreciation, you can either follow the prime cost method or diminishing value method.

  •  Prime cost method: The prime cost method assumes that the value of a depreciating asset declines equivalently over its effective life. This method permits investors to rely on a more consistent depreciation claim each year.
  • Diminishing value method: The diminishing value method assumes that the value of a depreciating asset declines more in the initial years of its effective life. This method has higher deductions in the first few years and a progressively smaller decline over time.

There will be different rules for the subsequent criteria: 

  • Assets used in mining investigation; 
  • Electricity and phone connections; 
  • Capital works such as buildings and structural developments;
  • Horticultural plants and water supply services used in primary production.  

 


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