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DG 8: Expenditure limitation rule
or “Rules for claiming expenses on assets used to earn income”
You could also call this:

“How to calculate the tax-deductible portion of an asset's expenses”

When you need to figure out how much of your expense or loss for an asset can be counted for tax purposes, you use a special formula. This formula helps you split the expense between when you use the asset to make money and when you use it for other things.

The formula looks like this: you take your total expense and multiply it by the number of days you used the asset to make money. Then you divide that by the total number of days you used the asset for any reason.

Your total expense is all the money you spent on the asset in a year, except for costs that were only for making money, only for private use, or for making the asset better long-term.

The days you used the asset to make money include times when you let someone else use it and they paid you, when someone booked it but didn’t use it, or when you provided it as a job benefit. Remember, you can’t count days when you made tax-free money from it.

The other days are when you used the asset but didn’t make money from it.

If it makes more sense, you can use hours or nights instead of days in the formula. Just make sure you use the same way of measuring time for both parts of the calculation.

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Next up: DG 10: Interest expenditure rules

or “Rules for managing interest expenses on certain company assets”
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Part D Deductions
Expenditure related to use of certain assets

DG 9Apportionment formula

  1. This section provides the formula for use where it is referred to in section DG 8 to calculate the way in which an amount of expenditure or loss that a person incurs in relation to an asset is apportioned between its income-earning use and its private or other use.

  2. The apportionment formula is—

    expenditure × income-earning days ÷ (income-earning days + counted days).

    Where:

    • In the formula,—

    • expenditure is the total expenditure or loss that is incurred by the person for an income year in relation to the asset, other than expenditure that is related solely to—
      1. the income-earning use of the asset as described in section DG 7:
        1. the private use of the asset:
          1. a use of the asset for which the expenditure is of a capital nature:
          2. income-earning days is the total number of days in the income year for which the person derives income from the use of the asset, other than exempt income, including any days on which—
            1. the use made of the asset is use described in section DG 4(3) to (5):
              1. the asset has become unavailable for use because another person who had earlier reserved the asset for their own use, subsequently did not take advantage of that reservation:
                1. a fringe benefit tax liability arises:
                2. counted days is the total number of days in the income year on which the asset is in use, and the day is not an income-earning day as described in paragraph (b).

                  1. A unit of measurement of time other than days, whether relating to hours, or nights, or anything else, is to be used in the formula and in subsection (3)(b) and (c), if it achieves a more appropriate apportionment. For this purpose, the same unit must be used in relation to both items in subsection (3)(b) and (c).

                  Notes
                  • Section DG 9: inserted (with effect on 1 April 2013 and applying for the 2013–14 and later income years for an item of property referred to in section DG 3(2)(a)(i), and for the 2014–15 and later income years for an item of property referred to in section DG 3(2)(a)(ii) and (iii)), on , by section 30(1) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
                  • Section DG 9(1): amended (with effect on 27 March 2021), on , by section 71 of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
                  • Section DG 9(1): amended (with effect on 1 April 2013), on , by section 102(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                  • Section DG 9(3)(a): replaced (with effect on 1 April 2013 and applying for the 2013–14 and later income years for an item of property referred to in section DG 3(2)(a)(i), and for the 2014–15 and later income years for an item of property referred to in section DG 3(2)(a)(ii) and (iii)), on , by section 54(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
                  • Section DG 9(3)(a)(iii): replaced (with effect on 1 April 2013 and applying, for the 2013–14 and later income years, for an item of property referred to in section DG 3(2)(a)(i); for the 2014–15 and later income years, for an item of property referred to in section DG 3(2)(a)(ii) and (iii)), on , by section 102(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                  • Section DG 9(3)(b): amended (with effect on 1 April 2013 and applying for 2013–14 and later income years for an item of property referred to in section DG 3(2)(a)(i), and for the 2014–15 and later income years for an item of property referred to in section DG 3(2)(a)(ii) and (iii)), on , by section 54(2) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).