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EE 15: Amount of adjusted tax value
or “How to calculate an item's value at the end of the income year”
You could also call this:

“How to calculate depreciation for business assets”

You use a formula to work out how much something you own for your business loses value over time. This is called depreciation. The formula is: yearly rate × value or cost × months ÷ 12.

The yearly rate is a number that shows how fast the item loses value each year. You express this as a decimal, like 0.2 for 20%.

The value or cost depends on how you calculate depreciation. If you use the diminishing value method, it’s the item’s value at the end of the tax year before taking off depreciation. If you use the straight-line method, it’s usually the cost of the item.

For some special items like patents or plant variety rights, you use a different starting value. For design registrations, design registration applications, or industrial artistic copyright, you use the cost but don’t include money spent before 7 November 2013 or money you can claim back in other ways.

The number of months is usually the lesser of 12 or the number of months you owned and used the item in the tax year. If your tax year is longer than 12 months, you count all the months you owned and used the item.

For patent applications and design registration applications, you only count whole months.

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Next up: EE 17: Amount resulting from petroleum-related depreciable property calculation

or “Calculating the yearly wear and tear on oil-related equipment”
Next

Part E Timing and quantifying rules
Depreciation

EE 16Amount resulting from standard calculation

  1. For the purposes of the comparison of amounts required by section EE 14(1), the amount dealt with in this section is calculated using the formula—

    annual rate × value or cost × months ÷ 12.

    Where:

    • The items in the formula are defined in subsections (3) to (5).

    • Annual rate is the annual rate that, in the income year, applies to the item of depreciable property under the depreciation method that the person uses for the item. It is expressed as a decimal.

    • Value or cost is,—

    • when the person uses the diminishing value method, the item’s adjusted tax value at the end of the income year before the deduction of an amount of depreciation loss for the item for the income year:
      1. when the person uses the straight-line method,—
        1. for a patent, design registration, or plant variety rights in relation to which the person has been allowed a deduction for an amount of depreciation loss for the relevant application, the item’s adjusted tax value at the start of the month in which the person acquires it:
          1. for a design registration to which subparagraph (i) does not apply, for a design registration application, or for industrial artistic copyright, its cost to the person, but excluding expenditure that the person incurred before 7 November 2013 or for which they are allowed a deduction under a provision of this Act outside this subpart:
            1. for other items, its cost to the person excluding expenditure for which the person is allowed a deduction under a provision of this Act outside this subpart:
            2. for the purposes of paragraph (b), variations to cost are in sections EE 18 to EE 19.

              1. Months, for a person whose income year contains 365 days or fewer, or 366 days or fewer in a leap year, is the lesser of the following:

              2. 12; and
                1. the number of whole or part calendar months in the income year in which—
                  1. the person owns the item; and
                    1. the person uses the item or has it available for use for any purpose.

                    2. Months, for a person whose income year contains more than 365 days, or more than 366 days in a leap year, is the number of whole or part months in the income year in which—

                    3. the person owns the item; and
                      1. the person uses the item or has it available for use for any purpose.

                        1. For the purposes of subsections (5) and (6), for a patent application and a design registration application, months refers to whole calendar months and whole months, as applicable.

                        Compare
                        Notes
                        • Section EE 16(4)(b)(i): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on , by section 116(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                        • Section EE 16(4)(b)(ib): inserted (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on , by section 116(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                        • Section EE 16(4)(c): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on , by section 116(3) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                        • Section EE 16(7) heading: amended (with effect on 1 April 2015), on , by section 116(4) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                        • Section EE 16(7): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on , by section 116(5) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                        • Section EE 16 list of defined terms design registration: inserted (with effect on 1 April 2015), on , by section 116(6) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                        • Section EE 16 list of defined terms design registration application: inserted (with effect on 1 April 2015), on , by section 116(6) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                        • Section EE 16 list of defined terms industrial artistic copyright: inserted (with effect on 1 April 2015), on , by section 116(6) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).