# First-Year Decline in Value — FY2025-26

**Asset details:** Cost $30,000 | Effective life 5 years | 100% taxable use | Full income year (no apportionment)

## (a) Prime cost method

$$\text{Deduction} = \$30{,}000 \times \frac{1}{5} = \textbf{\$6,000}$$

## (b) Diminishing value method

$$\text{Deduction} = \$30{,}000 \times \frac{2}{5} = \textbf{\$12,000}$$

(The 200% rate applies because the asset was first used on or after 10 May 2006.)

## Controlling authority

The decline in value (capital allowance) rules are contained in **Division 40 of the Income Tax Assessment Act 1997 (Cth)** — with the prime cost formula in **s 40-75** (per s 40-65) and the diminishing value formula in **s 40-72** — administered by the **Australian Taxation Office (ATO)**.

**Summary:** Prime cost = **$6,000**; Diminishing value = **$12,000**.