What is Effective Life of an Asset?

Effective lives – Explained

The ‘effective life’ of an asset is used by a Quantity Surveyor to work out an asset’s decline in value.

The Australian Taxation Office (ATO) describes an effective life as ‘the period of time that a depreciating asset can be used by any entity to produce assessable income:

assuming it will be subject to wear and tear at a reasonable rate,
assuming it will be maintained in reasonably good order and condition, and
having regard to the period within which it is likely to be scrapped, sold for nomore than scrap value or abandoned.’ Source: www.ato.gov.au

Depreciation deductions on structural renovations

If structural construction work is completed as part of the renovations (such as a new roof, walls or ceiling), this can also be depreciated. Any work carried out after 18 July 1985 (residential property) and 20 July 1982 (non-residential property) will be eligible to claim the capital works allowance (Division 43) as well as any plant and equipment deductions.

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What is Effective Life of an Asset?

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