ATO Depreciation Rates 2026: Effective Life Table and Examples
Author
Emmanuel Sarris
Date Published
The ATO doesn't set one depreciation rate for each type of asset. Your rate comes from the asset's effective life and the method you choose: prime cost is 100% ÷ effective life and diminishing value is 200% ÷ effective life, so a desktop computer with a 4-year effective life depreciates at 25% or 50% a year. This guide has a rate table for common effective lives, a worked example, and the shortcuts for small businesses, employees and property investors.
How ATO depreciation rates work
For tax, depreciation is called decline in value. You claim it on assets you use to earn income, such as computers, tools, vehicles and equipment. Your deduction each year depends on:
Cost: what you paid, excluding GST if you're registered for GST and claim it back.
Effective life: how many years the asset is expected to be used to earn income. You can use the ATO's effective life for the asset or work out your own.
Method: prime cost or diminishing value.
Work use: if you also use the asset privately, you can only claim the work share.
Depreciation rates by effective life
To convert an effective life into a yearly rate:
Prime cost: 100% ÷ effective life, applied to the original cost. You claim the same amount each year.
Diminishing value: 200% ÷ effective life, applied to the remaining value each year, so deductions are larger at the start. Assets you started to hold before 10 May 2006 use 150% instead of 200%.
Common effective lives and the rates they give:
2 years (laptops and tablets): 50% prime cost, 100% diminishing value
3 years: 33.33% prime cost, 66.67% diminishing value
4 years (desktop computers): 25% prime cost, 50% diminishing value
5 years: 20% prime cost, 40% diminishing value
8 years (cars): 12.5% prime cost, 25% diminishing value
Sam buys a $3,000 desktop computer on 1 July and uses it only for work. Desktop computers have an effective life of 4 years.
Prime cost (25%): $750 a year for four years.
Diminishing value (50%): $1,500 in year one, then $750 in year two (50% of the $1,500 left), $375 in year three, and so on.
Both methods deduct the same total in the end; diminishing value brings more of it forward. If Sam had bought the computer on 1 January instead, the first year's deduction is reduced for the days held: $3,000 × 50% × 181 ÷ 365 = $744 under diminishing value.
If Sam runs a small business, there's a better option: the instant asset write-off lets Sam claim the full $3,000 straight away.
Shortcuts that beat the standard rates
Small businesses: the $20,000 instant asset write-off
From 1 July 2026, businesses with an aggregated turnover under $10 million can claim the full cost of each eligible asset costing less than $20,000 in the year it's first used or installed ready for use. The threshold is now permanent (ATO). Assets costing $20,000 or more go into the small business pool, depreciated at 15% in the first year and 30% after that, and a pool balance under $20,000 at the end of the year can be written off. See the instant asset write-off.
Employees and investors: the $300 rule and the low-value pool
$300 or less: if you use an item mainly to earn non-business income, for example as an employee, and it isn't part of a set costing more than $300, you can claim it in full straight away.
Low-value pool: assets costing less than $1,000, or written down below $1,000, can go into a pool depreciated at 18.75% in the first year and 37.5% after that.
Rental properties
Investment properties have two kinds of deduction: decline in value of plant and equipment, such as appliances, carpets and blinds, and capital works deductions for the building itself, usually 2.5% a year for residential buildings built after 15 September 1987. If you bought a residential rental property after 9 May 2017, you generally can't claim decline in value on second-hand plant and equipment that was already in it. See how to calculate depreciation on a rental property. If you'd rather we handle it, our rental property tax return service covers capital works deductions and depreciation on eligible fixtures, using a quantity surveyor schedule where it helps.
Cars
Cars have an effective life of 8 years, but the cost you can depreciate is capped at the car limit ($69,674 for 2025–26). With the logbook method, depreciation is part of your car expense claim; with cents per kilometre, it's built into the rate. See our car logbook guide.
Assets you can't depreciate
Land, goodwill and trading stock aren't depreciating assets, so you can't claim decline in value on them. Some intangible assets, such as in-house software, patents and copyrights, can be depreciated over effective lives set by the tax law.
Common questions
What is the ATO depreciation rate for a laptop?
Laptops have an effective life of 2 years, so the rate is 50% with prime cost or 100% with diminishing value. Employees can claim a laptop costing $300 or less straight away, and a small business can write off a laptop costing less than $20,000 in full. Claim only the work share. See laptop depreciation.
Can I change depreciation methods?
You choose prime cost or diminishing value for each asset when you start claiming for it, and you can't change methods for that asset later.
What records do I need?
Keep the invoice showing the date and cost of each asset, how you worked out the work-use percentage, and for a rental property, a depreciation schedule from a quantity surveyor. Keep the records for five years after you last claim a deduction for the asset.
Should a tax agent work out my depreciation?
Choosing the method and shortcut for each asset can make a real difference to your deductions, especially for a business buying equipment or a property investor. Our business accountants work it out for every asset when we prepare your return.
Declare rent and bond you keep; claim interest, rates and repairs now and improvements over time. Plus the records the ATO expects and a lodging checklist.
