How To Calculate Asset Depreciation Australia 2026

How to Calculate Asset Depreciation (Australia 2026)

The Asset Depreciation Calculator computes the tax-deductible decline in value of a business asset using both Prime Cost and Diminishing Value methods under ATO rules.

How It Works

1. Enter the purchase price of the asset and its effective life (in years).
2. The calculator determines the annual deduction using the Prime Cost (straight-line) method.
3. It also calculates the Diminishing Value method, which front-loads the deductions.

Formula & Calculation Logic

Prime Cost: $\text{Deduction} = \text{Asset Cost} \times \left(\frac{\text{Days Held}}{365}\right) \times \left(\frac{100\%}{\text{Effective Life}}\right)$ Diminishing Value: $\text{Deduction} = \text{Base Value} \times \left(\frac{\text{Days Held}}{365}\right) \times \left(\frac{200\%}{\text{Effective Life}}\right)$

Worked Example

Asset: $10,000 computer server with a 4-year effective life. **Prime Cost:** 25$2,500 every year). Diminishing Value: 50% of the remaining value per year (Year 1: $5,000, Year 2:$2,500, Year 3: $1,250, etc.).

Result Interpretation

• Diminishing Value: Better if you want larger tax deductions in the early years of the asset's life.
• Prime Cost: Better for a steady, predictable tax deduction over the entire life of the asset.

FAQs

What is instant asset write-off?

If the asset qualifies under current ATO thresholds, you may be able to deduct the entire cost in Year 1 instead of depreciating it.

Can I change methods?

No, once you choose a depreciation method for an asset, you must stick with it for the life of that asset.

Sources & Last-Reviewed Date

• Sources: ATO Depreciation Guidelines (2026).
• Last-Reviewed: 2026-09-03