Business asset depreciation calculator (prime cost, diminishing value, instant write-off)
An Australian business deducts the cost of a depreciating asset over its effective life using prime cost (the same amount each year, cost × 100% ÷ effective life) or diminishing value (200% ÷ effective life applied to the remaining value, so more in early years). Small businesses with turnover under $10 million can deduct assets under $20,000 immediately. Enter the cost, life and start date to compare.
First-year deduction
$4,750.68
- Prime cost first year
- $4,750.68
- Diminishing value first year
- $9,501.37
- Immediate deduction
- —
- Cost basis
- $48,000.00
- Prime cost rate
- 12.5%
- Diminishing value rate
- 25%
Show breakdown
Calculation breakdown
- Cost basis
- $48,000.00
- Effective life years
- 8
- Instant asset write off eligible
- No
- Iawo threshold
- $20,000.00
- Prime cost rate
- 12.5%
- Diminishing value rate
- 25%
- Prime cost first year
- $4,750.68
- Diminishing value first year
- $9,501.37
- First year deduction
- $4,750.68
| Cost basis | $48,000.00 |
|---|---|
| Effective life years | 8 |
| Instant asset write off eligible | No |
| Iawo threshold | $20,000.00 |
| Prime cost rate | 12.5% |
| Diminishing value rate | 25% |
| Prime cost first year | $4,750.68 |
| Diminishing value first year | $9,501.37 |
| First year deduction | $4,750.68 |
| Fy | Days | Deduction | Closing value |
|---|---|---|---|
| 2026-27 | 289 | $4,750.68 | $43,249.32 |
| 2027-28 | 366 | $6,016.44 | $37,232.88 |
| 2028-29 | 365 | $6,000.00 | $31,232.88 |
| 2029-30 | 365 | $6,000.00 | $25,232.88 |
| Fy | Days | Deduction | Closing value |
|---|---|---|---|
| 2026-27 | 289 | $9,501.37 | $38,498.63 |
| 2027-28 | 366 | $9,651.03 | $28,847.60 |
| 2028-29 | 365 | $7,211.90 | $21,635.70 |
| 2029-30 | 365 | $5,408.93 | $16,226.77 |
| Year | Rate | Deduction | Closing value |
|---|---|---|---|
| 1 | 15% | $7,200.00 | $40,800.00 |
| 2 | 30% | $12,240.00 | $28,560.00 |
| 3 | 30% | $8,568.00 | $19,992.00 |
| 4 | 30% | $5,997.60 | $13,994.40 |
Schedules are alternatives, not deductions to combine. Compare mode shows prime cost above and diminishing value alongside it. Asset exclusions, private use and pool-wide write-off tests require separate review.
At a glance
- Prime cost
- cost × (days held ÷ 365) × (100% ÷ effective life), the same amount each full year
- Diminishing value
- opening value × (days held ÷ 365) × (200% ÷ effective life), front-loaded
- Instant asset write-off
- assets under $20,000 (ex GST if registered), aggregated turnover under $10M, permanent from 1 July 2026
- Small business pool
- 15% in the first year, then 30% of the pool balance
- Note
- Depreciation starts when the asset is first used or installed ready for use, not when it is bought
- Effective life
- the ATO's ruling (for example cars 8 years, laptops 2, forklifts 11) or your own reasonable estimate
How it is calculated
Adjust the cost for recoverable GST, count days from first use and apply the selected method’s rate. Cap deductions at remaining value and assess write-off eligibility separately.
cost_basis = cost ÷ 1.1 if cost includes GST and registered, else cost
Instant asset write-off: small business and cost_basis < 20,000 → immediate deduction of cost_basis in the income year the asset is first used
Prime cost (ITAA 1997 s40-75): deduction = cost_basis × (days_held ÷ 365) × (100% ÷ effective_life)
Diminishing value (s40-72): deduction = opening_adjustable_value × (days_held ÷ 365) × (200% ÷ effective_life)
(150% for assets first held before 10 May 2006)
days_held = days from the start date to 30 June inclusive in the first year; the full year after (366 in a leap year; the divisor stays 365)
schedule = one row per income year until the adjustable value is nil (prime cost) or the visitor's horizon; deductions capped so closing value ≥ 0
Small business pool (for a small business entity that chooses simplified depreciation, assets at or above the threshold):
year 1: 15% of cost; then 30% of the opening pool balance each year (shown as an alternative schedule)- Rates as at 2026-09-07 from Instant Asset Write Off
- Rates as at 2026-09-07 from Effective Life Examples · Verification pending
- Rates as at 2026-09-07 from Gst
What is the difference between prime cost and diminishing value?
Prime cost spreads the cost evenly: an asset with an eight-year effective life is deducted at 12.5% of cost every full year, so a $48,000 vehicle gives $6,000 a year. Diminishing value applies double that rate, 25%, to the remaining adjustable value each year, so the same vehicle gives $12,000 in a full first year, $9,000 in the second, $6,750 in the third and so on, never quite reaching zero (the remainder is written off on disposal). Both give the same total deduction over time; diminishing value brings it forward, which suits assets that lose value quickly and businesses that want the deduction sooner. Once a method is chosen for an asset it cannot be changed, so the comparison on this page is worth doing before the first return.
How does the ATO day-count formula work?
Both formulas multiply by days held ÷ 365, where days held is the number of days in the income year the asset was held and used (or installed ready for use). An asset first used on 15 September is held for 289 days to 30 June, so its first-year deduction is 289 ÷ 365 of the full-year amount; the calculator counts the days from the date entered. The divisor is 365 even in a leap year, so a full leap year gives 366 ÷ 365 of the annual rate, a quirk of the legislation the calculator reproduces rather than smooths over. Depreciation starts on the date the asset is first used or installed ready for use, which can be later than the invoice date for machinery that needs commissioning.
Who can use the $20,000 instant asset write-off?
A small business entity, meaning aggregated turnover under $10 million, for each asset costing less than $20,000 (excluding GST if the business is registered) that is first used or installed ready for use in the income year. The threshold applies per asset, so several assets under $20,000 each can all be written off in the same year. From 1 July 2026 the $20,000 threshold is a permanent measure under the Treasury Laws Amendment (Tax Reform No. 2) Act 2026, ending the year-by-year extensions. Assets at or above the threshold go into the small business pool (15% in the first year, 30% thereafter) if the business uses simplified depreciation, or are depreciated under prime cost or diminishing value otherwise.
How is depreciation handled in a fixed asset register?
Each asset carries its cost, start date, effective life, method and the running adjustable value, and the system posts the monthly or annual depreciation journal and produces the tax schedule at year end. A spreadsheet does this for a dozen assets; a warehouse with racking, forklifts, vehicles, computers and fit-out needs a register that also handles disposals, transfers between locations and the difference between accounting and tax depreciation. That register is a standard module in an ERP, and the schedule from this calculator is what its output should reconcile to.
| Income year | Days held | Prime cost deduction | Prime cost closing value | Diminishing value deduction | Diminishing value closing value |
|---|---|---|---|---|---|
| 2026–27 | 289 | $4,750.68 | $43,249.32 | $9,501.37 | $38,498.63 |
| 2027–28 | 366 | $6,016.44 | $37,232.88 | $9,651.03 | $28,847.60 |
| 2028–29 | 365 | $6,000.00 | $31,232.88 | $7,211.90 | $21,635.70 |
| 2029–30 | 365 | $6,000.00 | $25,232.88 | $5,408.93 | $16,226.77 |
| Rates | 12.5% of cost | 25% of opening value | |||
| Small business pool alternative | 15% year 1 ($7,200), then 30% ($12,240, $8,568, $5,997.60) |
Frequently asked questions
Which is better, prime cost or diminishing value?
Diminishing value gives larger deductions in the early years and prime cost gives the same amount every year; the total is the same. Businesses that want the deduction sooner, or whose assets lose value quickly, usually choose diminishing value. The method is chosen per asset and cannot be changed afterwards.
Does the instant asset write-off apply to cars?
Yes, if the car costs less than $20,000 excluding GST and the business is a small business entity. Cars costing more are depreciated normally, subject to the car limit that caps the depreciable cost of a passenger vehicle each income year. Private use reduces the deduction proportionally.
What effective life should I use?
The ATO publishes a ruling with effective lives for thousands of assets (for example 8 years for cars, 2 for laptops, 11 for forklifts, 20 for pallet racking), and most businesses use it. You can self-assess a shorter or longer life if you can justify it from how the asset is used. The calculator's lookup uses the ruling.
Is GST included in the cost for depreciation?
Not if you are registered for GST, because the GST is claimed as a credit on the BAS; the depreciable cost is the price excluding GST. If you are not registered, the GST is part of the cost. The calculator removes GST when you tick "cost includes GST" and are registered.
moving from Xero or AccountRight to an ERP
A fixed asset register that posts depreciation, handles disposals and reconciles to the tax schedule is a module, not a spreadsheet. See it in an ERP built for your size.
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