A Tradie's Guide to Calculating and Claiming Asset Depreciation

When you buy an expensive piece of equipment like an excavator or a heavy-duty van, the cost is not just a single expense for that year. Because that asset helps you earn money over several years, the tax office allows you to deduct a portion of the cost annually. This is called depreciation.

Understanding Effective Life

The tax office assigns an 'effective life' to every asset. This is their estimate of how long a piece of gear will be useful to your business before it wears out or becomes obsolete. You must use these guidelines to determine how much of the asset value you can write off each year.

• Power tools under $300 (immediate write-off)
• Vehicles (calculated based on logbooks and business use)
• Heavy machinery (depreciated over its effective life)
• Computer and office equipment used for quoting

1. Keep an asset register in your accounting software
2. Record the exact purchase date and total cost including delivery
3. Note the percentage of the time the asset is used for business purposes
4. Review your asset register every June to identify items you have sold or scrapped