200% vs 100% Plant & equipment
Diminishing Value vs Prime Cost — Rental Property Depreciation
There are only two ways to write off a depreciating asset, and the formulas are one character apart. Here they are side by side, with a year-by-year comparison on the same $15,000 of assets.
The two formulas
Diminishing value = asset value × (days held ÷ 365) × (200% ÷ effective life)
The asset value is the opening adjustable value — the cost less everything already claimed. That is what makes the deduction shrink each year.
Prime cost = asset cost × (days held ÷ 365) × (100% ÷ effective life)
The base is the original cost, every year. Nothing shrinks, so the deduction is constant until the asset is fully written off.
The ATO’s own example: a new outdoor table costing $1,500 with a five year effective life. Diminishing value is $1,500 × (365 ÷ 365) × (200% ÷ 5) = $600.00. Prime cost is the same formula with 100% instead of 200%, giving $300.00. Same asset, same year, half the deduction.
Year by year on $15,000 of assets with a 10 year effective life
Both methods, run over 12 years, so you can see exactly where the crossover happens:
| Year | Diminishing value | DV running total | Prime cost | PC running total |
|---|---|---|---|---|
| 1 | $3,000.00 | $3,000.00 | $1,500.00 | $1,500.00 |
| 2 | $2,400.00 | $5,400.00 | $1,500.00 | $3,000.00 |
| 3 | $1,920.00 | $7,320.00 | $1,500.00 | $4,500.00 |
| 4 | $1,536.00 | $8,856.00 | $1,500.00 | $6,000.00 |
| 5 | $1,228.80 | $10,084.80 | $1,500.00 | $7,500.00 |
| 6 | $983.04 | $11,067.84 | $1,500.00 | $9,000.00 |
| 7 | $786.43 | $11,854.27 | $1,500.00 | $10,500.00 |
| 8 | $629.15 | $12,483.42 | $1,500.00 | $12,000.00 |
| 9 | $503.32 | $12,986.73 | $1,500.00 | $13,500.00 |
| 10 | $402.65 | $13,389.39 | $1,500.00 | $15,000.00 |
| 11 | $322.12 | $13,711.51 | — | — |
| 12 | $257.70 | $13,969.21 | — | — |
Diminishing value hands you $3,000.00 in year one against $1,500.00 for prime cost — $1,500 more, in the first year alone. Prime cost catches up around year 5, and after 10 years it has written off the full $15,000 while diminishing value still has a balance left on the books.
Which one should you pick?
| Your situation | Usually better | Why |
|---|---|---|
| You want the largest deduction now | Diminishing value | Double the first-year deduction |
| You expect to sell in a few years | Diminishing value | Front-loads the benefit while you still own it |
| You want an even, predictable deduction | Prime cost | The same amount every year |
| You want the asset fully written off at the end of its effective life | Prime cost | Diminishing value leaves a residual balance |
| You are on the top marginal rate and staying there | Either — the timing is the only difference | Total deductions converge over time |
Three thresholds worth knowing
- $300 or less — claim it in full in the year you first use it. But not if the items form a set costing more than $300 together.
- $1,000 — assets with an adjustable value under this can be grouped into a low value pool and depreciated together.
- 9 May 2017, 7:30pm AEST — the dividing line for second-hand plant and equipment. Bought the property after this and you generally cannot claim the decline in value of the used items that came with it.
Frequently asked questions
What is the difference between diminishing value and prime cost?
Diminishing value takes a constant percentage of the asset’s remaining value each year, so the deduction is largest at the start and shrinks. Prime cost takes a uniform slice of the original cost, so every year’s deduction is the same and the asset is fully written off at the end of its effective life.
Which gives a bigger deduction?
Diminishing value, in the early years — twice as much in year one. Prime cost overtakes it in later years, and it finishes the job within the effective life while diminishing value keeps going past it on a shrinking balance.
Can I change methods later?
Not for an asset you have already started claiming, in general. You choose a method for each asset when you first claim it, and that is the method for that assets life. You can choose differently for different assets.
What about assets costing $300 or less?
You can claim them in full in the year you first use them — but not if they are part of a set costing more than $300 together. Four chairs at $250 each are a $1,000 set, not four separate assets.
What is a low value pool?
Assets with an adjustable value under $1,000 can be grouped and depreciated together at a single pool rate. It saves record keeping when you have a lot of small items. Your quantity surveyor’s schedule normally handles this for you.
Does the method matter if the asset is not new?
It may not matter at all — you usually cannot claim the decline in value of second-hand plant and equipment in a residential rental property acquired after 7:30pm (AEST) on 9 May 2017. Capital works is unaffected by that rule.
Next
- Property depreciation calculator — put your own figures in
- Capital works deductions — the 2.5% and 4% rules for the building
Formulas and thresholds from the Australian Taxation Office, checked 12 October 2026.