## Decline in Value Deduction

(a) **Prime cost method:**  
`decline = cost * (1 / effective life) = $30,000 * (1/5) = $30,000 * 0.2 = $6,000`  
**First-year deduction: $6,000**

(b) **Diminishing value method (200% rate):**  
`decline = cost * (2 / effective life) = $30,000 * (2/5) = $30,000 * 0.4 = $12,000`  
**First-year deduction: $12,000**

**Controlling authority:** The decline in value rules are contained in Division 40 of the *Income Tax Assessment Act 1997* (ITAA 1997), administered by the Australian Taxation Office (ATO).