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Effective life review of assets used in general practice

Effective lives are used to work out how much of a tax deduction can be claimed for an asset's decline in value – otherwise known as depreciation deduction.

28 Jun 2019

The Australian Taxation Office has started a review of the assets used in the general practice medical services industry (ANZSIC code 85110) with a view to making new effective life determinations.

Effective lives are used to work out how much of a tax deduction can be claimed for an asset's decline in value – otherwise known as depreciation deduction.

For most depreciating assets, the choice is either working out the effective life independently or using an effective life determined by the Commissioner of Taxation.

The purpose of the review is to ensure the ATO effective life determinations cover assets commonly used by the medical profession and reflect current industry practices and expectations. ATO determinations save individuals the cost of self-assessing effective lives and provide an effective life that will not be challenged in case of a review.

The participation of industry stakeholders is critical to the success of any effective life review. The greater the level of participation by industry stakeholders, the more likely the resultant effective life determinations will be accurate and useful for industry participants. The Corporate Taxpayers Association and Chartered Accountants Australia and New Zealand encourage their members to assist in this important work.

The review is anticipated to cover assets used in general practical medical services. The ATO expects to complete the review of these assets within 12 months, with the new effective life determinations expected to apply from the beginning of July 2020.

Draft effective lives will be issued for public comment before final decisions are made.

As part of this review, the ATO will:

  • identify the assets currently used in the industry;
  • consult with major interest groups, such as industry representative bodies, users and suppliers (including interviews and site asset inspections);
  • complete a report with recommendations for new effective lives based on an analysis of the factors listed in the effective life taxation ruling; and
  • remove redundant items currently in the effective life schedule (where applicable).

Participation in the review process is entirely voluntary. However, participation from industry gives members confidence that the ATO will properly consider their feedback, given their range of experience, and that the determinations will be useful to industry members.

Participation may take a few hours in total and can be spread over the course of the review at time convenient to participants.

Any information that is provided to the ATO will be subject to the secrecy provisions as well as classified as commercial in confidence and will only be used for recommending effective lives to the Commissioner of Taxation.

Anyone wanting to participate in the review can contact Kim Dziedzic on (07) 3213 5764 or at Kim.Dziedzic@ato.gov.au

The above information is an edited extract from the ATO’s website. The full version can be viewed at:

https://www.ato.gov.au/Business/Depreciation-and-capital-expenses-and-allowances/In-detail/Effective-life/Reviews-in-progress/Capital-allowances--effective-life-review-of-assets-used-in-general-practice-medical-services/

 


Published: 28 Jun 2019