Capital Allowances:

From 1 July 2001, uniform capital allowance (UCA) rules apply to most depreciating assets, including those acquired before that date. The UCA system consolidates a range of former capital allowance provisions, including those relating to plant and equipment. It does this by providing a set of general rules that applies across a variety of depreciating assets and certain other expenditure. It maintains some concessional tax treatments such as those applying to primary production depreciating assets. It also introduces new deductions for certain types of capital expenditure that did not previously attract a deduction.

Under the UCA system, you still decide whether to calculate the decline in value of an asset using the prime cost or diminishing value method. Under the prime cost method, the decline is generally calculated as a percentage of the initial cost of the asset and reflects a uniform decline in value over time. Under the diminishing value method, the decline for each income year is calculated on the balance of the asset’s cost that remains after the decline in value for previous income years has been taken into account.

You can choose to recalculate the effective life of an asset if your circumstances of use change and the effective life you have been using is no longer accurate. If you make an improvement to an asset that increases its cost by 10% or more in a year, you may be obliged to recalculate its effective life.