Topics on tax issues for lessors and lessees (6)




Machinery, regardless of whether it forms an integral part of premises or it is a part of a setting for a taxpayer’s income earning activities. In the context of leased premises, machinery includes assets such as air-conditioning units, cooktops and ovens. It does not, however, include anything that is merely connected to, but not part of, a unit that is a machine (e.g., certain ducting, piping or wiring). Note that, where ducting, piping or wiring forms part of a unit that is a machine, then it is also regarded as machinery. Refer to paragraphs 17 to 21 of TR 2007/9.


Plumbing fixtures and fittings (including wall and floor tiles) provided by a taxpayer carrying on a business and mainly for their employees.


Fences, dams and other structural improvements on land used for agricultural and pastoral operations, provided they are not used for domestic or residential purposes (other than for the accommodation of employees, tenants or shareholders engaged in or in connection with these activities).

How is depreciation calculated on a depreciating asset?

The rules that generally apply to the calculation of depreciation are contained in Division 40 (referred to as the ‘uniform capital allowance rules’) and Subdivision 328-D (being the accelerated depreciation rules for SBE taxpayers), as discussed below.

  • Division 40 (i.e., the uniform capital allowance rules)

Depreciation is generally calculated using one of two methods (i.e., either the prime cost method or the diminishing value method). While there are differences in the respective calculation methodologies, both methods utilise (as their basis of calculation) the cost of a depreciating asset as well as its effective life (which is, broadly, the total period in which the asset can be used for any purpose).



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Written by Panbo Ye

I help people discover POWERFUL unknowns in Tax Ideas | Wealth Strategies | Retirement Planning | Finance Solutions!

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