Question

A taxpayer is an employed accountant and has several depreciating assets. Some are depreciated under Div 40 general provisions and some are depreciated under the Div 40 low value pool provisions.  

The taxpayer had purchased a lap top for $2,000 with an effective life of 4 years in 2017, and the taxpayer had depreciated it using the prime cost method, whereby its adjustable value was $1,200 as at 30 June 2019.

Based on the above facts, advise from the choices below, which method would provide the maximum value of depreciation the taxpayer can claim.

Select one:

a. Write off the asset entirely

b. Add the asset to the low value pool and use the higher depreciation rate.

c. Change to the diminishing value method and double the depreciation

d. Continue to use the prime cost rate

Answer 1

As per the Division 40 In calculating the decline in value, a taxpayer can choose between the prime cost method or the diminishing value method for a particular asset. Once a taxpayer chooses a method for a particular asset, the taxpayer cannot change the method for that asset.

Therefore in this case option D would be the right answer as per the above explanation.