## First-Year Decline in Value

**(a) Prime cost method**

cost × (1 / effective life) = $30,000 × (1 / 5) = **$6,000**

**(b) Diminishing value method**

cost × (2 / effective life) = $30,000 × (2 / 5) = **$12,000**

## Controlling Authority

The decline in value (capital allowance) rules are governed by **Division 40 of the Income Tax Assessment Act 1997 (ITAA 1997)**.