Legislative changes to the effective life of aeroplanes and helicopters
Are you the holder of an aeroplane or helicopter, which you used for the first time for any purpose after 1 July 2002? If so, then a tax deduction may be available to you.
The deduction is available to the extent you use the aeroplane or helicopter for a taxable purpose and is based on the asset's decline in value. The decline in value of the asset is calculated using the asset's effective life.
Broadly speaking, the effective life is the period the asset can be used by anyone to produce income.
The new legislative caps on the effective life of aeroplanes and helicopters are shown in the table below:
| Asset | Capped Life |
|---|---|
| Aeroplanes used predominantly for agricultural spraying or agricultural dusting | 8 years |
| Helicopters used predominantly for mustering, agricultural spraying or agricultural dusting | 8 years |
| Other aeroplanes or helicopters | 10 years |
How will the new legislative caps on effective life work?
Before the caps on the effective life of aeroplanes and helicopters were introduced in July this year, holders of aeroplanes and helicopters could choose to use the relevant effective life determined by the Commissioner of Taxation, or to work out the effective life themselves in accordance with the legislation.
This new provision means the holder of an aeroplane or helicopter who:
- first uses the asset for any purpose after 1 July 2002; and
- chooses not to self-assess its effective life,
must use the capped life, which is shorter than the relevant effective life determined by the Commissioner.
For example, John buys an aeroplane and first uses it after 1 July 2002. He uses it predominantly for agricultural spraying. If he chooses not to work out the effective life himself then he must use the capped life of 8 years (row 1 in the above table), not 10 years as is currently determined by the Commissioner.
For more information on the effective life of depreciating assets call the Tax Office on 132478 or visit the ATO website (www.ato.gov.au) where you will find the following items that may be of assistance:
- Effective life of depreciating assets;
- Taxation Ruling TR 2000/18 (as at 1 January 2003) - containing the Commissioner's determination of effective life for various depreciating assets; and,
- The Income Tax Assessment Act 1997, section 40-102.