# First-Year Decline in Value Calculation

**Asset cost:** $30,000
**Effective life:** 5 years
**Use:** 100% taxable purpose, full year (no apportionment)

## (a) Prime Cost Method

Formula: cost × (1 / effective life)

= $30,000 × (1 / 5)
= $30,000 × 0.20
= **$6,000**

## (b) Diminishing Value Method

Formula: cost × (2 / effective life)

= $30,000 × (2 / 5)
= $30,000 × 0.40
= **$12,000**

## Controlling Authority

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