6Effective life of a depreciating asset

6  Effective life of a depreciating asset

 (1) An entity must work out the effective life of a depreciating asset in accordance with subsections 6(2) and 6(3) where the entity:

1.     is satisfied that the asset is a depreciating asset for the purpose of Division 40 of the Act;
2.     has made a choice under section 40-95 of the Act to use an effective life determined by the Commissioner for the asset; and
3.     is not required to work out an effective life for that asset in accordance with a previous determination made under section 40-100 of the Act.

Note: An entity’s choice to use an effective life determined by the Commissioner for a depreciating asset is limited by subsection 40-95(2) of the Act. The operation of that subsection means that the entity may need to refer to a previous determination to work out the effective life for a depreciating asset.

 (2) For a depreciating asset used in an industry specified in a heading in Table A of Schedule 2, if the asset:

 (a) corresponds exactly to the description in column 1 of a row in the table, the effective life of the asset is the period specified in column 2 of that row; or

 (b) does not correspond exactly to but is of a kind that falls within or broadly satisfies the function described in column 1 of a row in the table, the effective life of the asset is the period specified in column 2 of that row.

 (3) Where subsection 6(2) does not apply and the depreciating asset corresponds to a description in column 1 of a row in Table B of Schedule 2, the effective life of the asset is the period specified in column 2 of that row.

Note 1: If an entity chooses to use an effective life determined by the Commissioner for a depreciating asset, a capped life may apply to the asset under section 40-102 of the Act.

Note 2: If an entity does not choose to use an effective life determined by the Commissioner for a depreciating asset, the effective life of the asset must be worked out in accordance with section 40-105 of the Act.