This support note is designed to explain the changes to the calculation of the Diminishing Value method of depreciation within MYOB AssetManager Pro that was previously set to 150% of an asset's effective life. This calculation has changed effective from 10 May 2006 to 200% of an asset's effective life.

What is Diminishing Value?

Diminishing Value is a method of depreciation that applies a set percentage to the open written down value each year. This is the amount remaining for depreciation after deducting prior depreciation and other adjustments from the original cost.

What was the previous value of depreciation for Diminishing Value?

The previous value for the Diminishing Value method of depreciation was 150% of an asset's effective life for assets acquired up to and including the 9 May 2006. Assets acquired on or before the 9 May 2006 will not change and continue to attract a diminishing value of 150%.

What is the new value of depreciation for Diminishing Value?

Effective from 10 May 2006 the new rate of depreciation for Diminishing Value is 200% of an asset's effective life. This new value will apply to all eligible assets both new and second hand acquired on or after 10 May 2006 including assets with statutory caps. For further information about statutory caps and limits please contact your Accountant or Tax Advisor.

Does this impact customers using the Simplified Tax System (STS)?

There is no impact for customers using STS (SBE)

 
How does MYOB AssetManager Pro calculate depreciation using Diminishing Value?

Using the example of a $4000 asset with an effective life of 4 years on a diminishing value basis:

Currently MYOB AssetManager Pro 3 will perform the following calculation:

150 ÷ 4 = 37.5% X $4000 = $1500 depreciation deduction in the first year.

According to the Government's Budget announcements, for new assets acquired on or after 10 May, 2006 the calculation will be as follows:

200 ÷ 4 = 50% X $4000 = $2000 depreciation deduction in the first year.

What is the impact for MYOB AssetManager Pro customers?

For a Non-STS (UCA) business, if you enter an eligible new asset acquisition with a date of 10 May 2006 or later, MYOB AssetManager Pro will calculate an amount of depreciation that is not in accordance with these new calculation rules.

This is because MYOB AssetManager Pro has the Diminishing Value percentage of 150% pre-programmed in the application with no user option to amend this.

What can I do about this change to the depreciation calculation of Diminishing Value?

Note: This has been resolved by upgrading to AssetManager Pro v3.5.

What if I have already relied upon and reported the depreciation calculations within MYOB AssetManager Pro to the ATO or in my company financial accounts?

The old value for the Diminishing Value calculation within MYOB AssetManager Pro version 3 is 150% of an asset's effective life and thus any depreciations values for assets entered on or after 10 May 2006 would under calculate the depreciation expense portion.

Any depreciation claims reported to the ATO would also be under calculated and there would be no detrimental impact of this with the ATO. The depreciation expense value reported on company financial accounts would likewise have been under calculated.

In these circumstances we suggest that you discuss any possible issues with your accountant or tax advisor.