The guidance helps determine how much of the asset’s cost taxpayers can claim as a tax deduction each year. 

The Australian Taxation Office (ATO) has published the final guidance for the effective life of depreciating assets on 23 September 2025.

Final guidance: Effective life of assets

The effective life of a depreciating asset is the period over which it’s expected to be used to produce income. This timeframe helps determine how much of the asset’s cost you can claim as a tax deduction each year.  ATO sets the effective lives for different types of assets based on how long they typically last in real-world business use.

As part of ATO’s regular legislative instrument review process, we’ve finalised Income Tax (Effective Life of Depreciating Assets) Determination 2025 following consultation in June. This guidance replaces the previous legislative instrument from 2015, which sunsets on 1 October 2025.

Tax Ruling 2022/1 will be withdrawn at the end of October 2025. This ruling explained the methodology the ATO used to decide on the effective life of depreciating assets. They are withdrawing this ruling as the effective life determinations are available in either:

What this means for you

For businesses, this change is purely administrative. The new instrument continues to provide effective life determinations for depreciating assets under Division 40 of the Income Tax Assessment Act 1997. Importantly, there are no changes to how the ATO engages with you or how you apply these rules.

When businesses apply the effective life of a depreciating asset, they must ensure that they use the rate that best applies to them. When deciding which effective life applies to a depreciating asset, businesses need to consider the:

  • time the asset was acquired
  • time the asset was first used or was installed ready for use
  • type of asset.

If the effective life of an asset is not listed in ATO’s legislative instrument, you may wish to apply for a review.