2019 Effective Lives

The ATO has a dedicated team whose role is to update and expand the Commissioner’s effective life schedule attached to Taxation Ruling TR 2018/4.
This is achieved by staff undertaking effective life reviews, either of a single asset (such as concrete truck mixers), or an industry (e.g. professional
photographic services).

Broadly, these reviews involve:

• Identifying the assets currently used in the industry
• Consulting (including interviews and asset inspections) with major interest groups such as industry representative bodies, users and suppliers
• Completing a report with recommendations for new effective lives
• Removing redundant items currently in the commissioner’s schedule.

New effective lives arising from these reviews are published twice yearly as addenda to the Taxation Ruling.

The objective of a review is to determine the effective life of the assets used by an industry, to reflect the circumstances of use for most users in that
industry. The
ATO seeks to identify the circumstances of use which is the industry norm, consistent with standard industry practice.

This represents a break with the past where most of the effective life determinations were based on an estimate of the average circumstances of use in
an industry. Clearly, taxpayers whose circumstances of use are different to the industry norm can self-assess their own effective life.

To date, the
ATO has selected industries and/or assets for review where the old determinations were clearly anomalous and inconsistent with current industry norms.
Some reviews were initiated in response to requests from taxpayers. The effective life and capital allowances centre of expertise within the Tax
Office has now initiated a risk management approach to identify assets or industries for review.They have identified the following three risk factors,
each being of equal weight: The dollar amount of depreciation claimed annually, the number of taxpayers who own the asset(s) and whether or not
the asset/industry is listed in the effective life schedule, and, if it is listed, whether or not that listing is inconsistent with current industry
practice.

The ATO make periodic consolidations of Tables A and B to incorporate further effective life determinations made by the Commissioner resulting from reviews
undertaken. Industry bodies and interested taxpayers are consulted during the course of effective life reviews and, in some instances, reports prepared
by independent consultants are used. An independent review panel also checks each review process to confirm the level of industry consultation was
appropriate. That panel typically comprises representatives from the Corporate Tax Association, The Institute of Chartered Accountants in Australia
and the Australian Taxation Office.

In TR 2018/4, the Commissioner has made a determination of the effective life of certain depreciating assets in Tables A and B with effect from 1 July 2018.

Due to the level of detail contained in TR 2018/4, only the industries covered by Table A are listed below rather
than particular assets.Please refer directly to the ruling if you are in any of these industries.

Schedule – ANZSIC categories in Table A

TR 2018/4 – Effective lives (Asset categories)
Table B as at 1 July 2018