assetmanagementsoftware.com.au Drawer: depreciating assets

Register card 00The index

Asset management software, and the register behind it

This guide judges asset management software by one test: would the register it keeps satisfy the Australian Taxation Office for every asset, from the day it is bought to the day it leaves the business? It is published by Dotto, written from the ATO’s own pages and the laws behind them, which are listed at the foot of each page.

General information

This is general information, not tax advice. Every threshold here carries the date or income year the ATO gives it for. The ATO is the official place to check how a rule applies to your business.

A blank dark grey tag with a metal eyelet and a loop of white string, lying on a pale grey surface.
A tag ties one record to one thing, and stays with it for as long as the thing is kept. A register card does the same for each of a business’s assets. Photo by BRRT on Pixabay

The cardOne asset’s life, in five moments

A register card is opened once and written on for years. Here is one asset’s life on its card, each moment beside the card in this drawer that covers it.

  1. BoughtThe cost goes on the card: the price plus anything paid for transport, installation or making it ready to use. For a small business on the simplified rules, an asset costing at or above the instant asset write-off limit joins the small business pool. The small business pool, worked through
  2. First usedDecline in value runs from the first day the asset is ready for use, but the ATO allows a deduction only from when it is used for a taxable purpose, and only for that share. Business use, and the clock on each asset record
  3. Business use changesFor a pooled asset, business use is reviewed each year for the first 3 years after the year it joined, and a change of more than 10% adjusts the pool’s opening balance. In the pool, the estimate is checked for 3 years
  4. Effective life chosenThe ATO describes two ways to set the life: use its determinations, or self-assess. Effective life, and the software itself
  5. Leaves the businessSold, lost, destroyed, or no longer used with no expectation of using it again, the asset’s termination value is compared with its adjustable value, and the difference is income or a deduction. For an asset in the small business pool, the taxable purpose proportion of the amount received reduces the pool instead. When an asset leaves the business

The softwareWhere the program fits

Software does the arithmetic, and the ATO’s page on simpler depreciation for small business puts the caution plainly: “Modern bookkeeping systems generally calculate depreciation, but make sure you have chosen the right settings to apply the simplified depreciation rules.”

Those settings are the business’s choices, not the program’s. One is the effective life, and the ATO says its own determinations will not be challenged in any audit, while for a self-assessed life it may ask you to explain how you worked it out.

Another, in most cases, is the method. Prime cost assumes an asset’s value falls evenly over its effective life; diminishing value assumes it falls more in the early years. A third is whether to use the simplified depreciation rules at all. The ATO says a business that chooses them must use the whole set, not pick out single parts such as the instant asset write-off.

The software itself may not belong on the register. The ATO lists software subscription fees, with accounting and inventory management software among its examples, as operating expenses, and says most operating expenses are claimed in the year they are incurred. Software a business buys or has built for its own use is treated differently, and card 02 explains how.

The drawerThe cards in this drawer

  1. Used

    Business use, and the clock on each asset record

    How the business share of each asset is recorded and reviewed, and when each record’s 5-year clock starts.

  2. Life set

    Effective life, and the software itself

    The Commissioner’s figure or your own, the 2025 determination, and how subscriptions and in-house software are treated.

  3. Pooled

    The small business pool, worked through

    The pool’s year step by step, from the opening balance to the low balance rule, with two worked examples.

  4. Leaves

    When an asset leaves the business

    Sale, loss, destruction or a decision never to use it again, and the entry that closes the card.

  5. Kept

    Keeping the register safe

    A record the ATO can read, locked by the Australian Signals Directorate’s small business advice, with a note on where a cloud register’s data sits.

The back of the cardRecords that outlast a year

A register is not rebuilt each year; it carries forward. The ATO says a business using the simplified depreciation rules keeps records for 5 years of how it worked out its opening pool balance, any change in how much it uses an asset in the business, and any assets it disposes of. Those three moments are where a register earns its keep, and each one has a card in this drawer.