Mastering Equipment Depreciation for Trades
23 October 2026 · 5 min read · By Heaney Accounting
What is Depreciation?
When you buy a big-ticket item like an excavator or a high-end laser level, you don't just expense the whole cost immediately. Instead, you claim the cost over the life of the item as it wears out.
Keep Your Records: Always keep your original purchase receipts, as the ATO requires proof of the date and cost to verify your depreciation claims.
Steps to Calculate Your Deduction
- Determine if the item is an immediate write-off or must be depreciated.
- Choose between the Prime Cost or Diminishing Value method.
- Calculate the effective life of the tool based on ATO tables.
- Apply the rate to the asset value each financial year.
- Earthmoving machinery
- Vehicle modifications and toolboxes
- Professional-grade power tools
- Workshop hardware and shelving
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