Depreciation is how the value of an asset decreases over time due to use, wear and tear, or obsolescence. In accounting, it lets businesses spread the cost of large purchases (like vehicles or equipment) over multiple years.

At Ozobooks, we help Australian businesses calculate depreciation accurately for tax and reporting purposes—so you don’t miss out on deductions or fall behind on compliance.

What Is Depreciation?

When you buy an asset that lasts longer than a year (e.g. computer, machinery, vehicle), you typically can’t deduct the full cost immediately. Instead, you claim part of the cost each year through depreciation.

There are two main methods accepted by the ATO:

• Diminishing Value: Higher deduction early on
  
• Prime Cost: Equal deduction each year
  

The choice affects your tax planning and should be based on business needs.

Example:

You buy a laptop for $3,000. Using the prime cost method at 20% per year, you claim $600 each year for 5 years.

What Assets Can Be Depreciated?

Eligible depreciating assets include:

• Computers and electronics
  
• Furniture and office fit-out
  
• Vehicles and tools
  
• Machinery and equipment
  

Assets must be:

• Owned and used in your business
  
• Have a limited useful life
  
• Cost above the instant asset write-off threshold
  

Key Tax Rules (2025 Update)

• Depreciation starts when the asset is installed and ready for use
  
• Low-value pooling may apply for items under $1,000
  
• Immediate write-offs may apply under current tax incentives (check with us for the latest thresholds)
  

Depreciation vs Amortisation

Feature	Depreciation	Amortisation
Applies to	Tangible assets	Intangible assets
Example Assets	Cars, machines, computers	Trademarks, software
Tax Treatment	Deduct over asset’s life	Deduct over contract/useful life

How Ozobooks Helps

• Identifying assets that qualify for depreciation
  
• Choosing the best method for your situation
  
• Tracking asset values over time
  
• Including depreciation in BAS or year-end reports
  

FAQ:

Q1: Is depreciation tax-deductible?
Yes. It reduces your taxable income over several years instead of all at once.

Q2: Do I have to use the same method every year?
Generally yes, but you can switch in some cases. We can advise based on your business setup.

Q3: What happens if I sell the asset?
You may need to make a balancing adjustment. We’ll help calculate it.

Q4: Can I depreciate second-hand assets?
Yes, as long as they are used for business and meet ATO guidelines.