Depreciation Calculator
Australia

IAS 16 Depreciation in Australia — AASB 116 Property, Plant and Equipment (equivalent to IAS 16)

Australia applies IAS 16 through AASB 116, which is the Australian equivalent of IAS 16 with no substantive modifications. All Australian entities preparing general purpose financial statements under the Corporations Act 2001 apply AASB 116. The Australian Accounting Standards Board (AASB) has adopted IFRS standards with Australian-specific paragraphs (prefixed 'Aus') that add disclosure or scope requirements but do not modify the core depreciation rules. For tax purposes, the Australian Taxation Office (ATO) publishes detailed effective life rulings (TR 2024/2 and predecessors) that specify useful lives for every conceivable asset type.

Regulatory Context — Australian Securities and Investments Commission (ASIC) / Australian Accounting Standards Board (AASB)

ASIC (Australian Securities and Investments Commission) conducts financial reporting surveillance and has included PP&E depreciation in its focus areas. Key ASIC findings include: entities using ATO effective life rulings as the basis for accounting useful lives without independent assessment, insufficient component depreciation for mining and infrastructure assets, and inadequate disclosure of changes in depreciation estimates. ASIC has emphasised that AASB 116 useful lives must be based on the entity's expected use, not ATO effective lives.

Practical Guidance for Australia

The ATO publishes comprehensive effective life tables (Taxation Ruling TR 2024/2) that specify useful lives and diminishing value rates for virtually every type of depreciable asset. While these are authoritative for tax purposes, they should not be adopted uncritically for AASB 116 accounting purposes. The ATO effective life may differ from the entity's expected useful life because the ATO table represents an industry-wide average, not an entity-specific assessment. However, where the entity's expected use is typical for the industry, the ATO effective life may provide a reasonable starting point that is then adjusted for entity-specific factors.

Audit Expectations

Australian auditors follow Australian Auditing Standards (ASAs), which are equivalent to ISA. The audit of depreciation estimates requires: assessment of whether useful lives are entity-specific (not simply ATO effective lives), evaluation of residual value estimates against market data, verification that component depreciation is applied where required, and documentation of the annual review of estimates. The Financial Reporting Council (FRC) oversees audit quality inspections through ASIC and has flagged PP&E as an area for improvement.

Australia-Specific Considerations

Australian-specific considerations include: the instant asset write-off for small business entities (currently $20,000 threshold), which allows immediate tax deduction but does not affect AASB 116 accounting. The small business simplified depreciation pool allows grouping of assets below $20,000 for tax depreciation. The mining sector dominates Australian PP&E accounting — mining entities have the most complex PP&E portfolios with extensive component depreciation, decommissioning obligations, and units-of-production depreciation for reserve-linked assets. The Australian climate and harsh operating conditions in mining and agriculture may justify shorter useful lives than international benchmarks.

Common Inspection Findings

ATO effective life rulings adopted for accounting without entity-specific assessment

Component depreciation not applied to mining and infrastructure assets

Residual values not reviewed annually — defaulting to zero without market data assessment

Changes in useful life estimates not disclosed as required by AASB 108 (IAS 8)

Decommissioning asset components not separately tracked and depreciated