What is Division 40?

Division 40 is the category which covers assets that are easily removable from a building rather than attached or fixed. These include appliances and furnishings. Each item of plant or equipment within your property has an effective life measured in number of years.

The effective life is determined by the tax commissioner under the latest Taxation Ruling. It is used to calculate the assets decline in value.

Plant and equipment fall under the Division 40 asset class and are depreciated as per the following methods:

Immediate write-off

Eligible plant and equipment items with a cost of $300 or less qualify for an immediate full deduction and have been applied accordingly in the calculations.

Low value pool

Includes assets that are purchased in the current financial year worth less than $1,000 (low-cost assets) and also those assets that have been acquired prior to this current financial year and currently worth less than $1,000 (low-value assets) are eligible for the low-value pool; these are depreciated as follows:

  • 18.75% in the first year (applicable to low cost assets only)
  • 5% in the subsequent years (applicable to all assets less than $1,000)

Effective life depreciation

For any other items that do not fall within the above criteria as either low-value pooled items or immediately written-off, they will be depreciated as per the effective-life schedule.

2017 Budget

The Federal Budget announcement for 2017 has proposed changes to claims of depreciation that may affect Australian Residential Property Investors whom are purchasing property after 7:30pm on the 9th of May 2017. At time this article was written, Duo Tax Quantity Surveyors are not aware of this proposed legislation being formalized. However, we do inform all our clients of the possibility of this coming to fruition and how it will affect them.

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