Reconciling Tax and Accounting decline in value for a leap year

This support note applies to:

• AO Tax (AU)
• AE Assets (AU)
• AO Classic Tax (AU)
• AE Tax Series 6 & 8 (AU)
• AE Tax (AU)

In MYOB Accountants Enterprise (AE) Assets there could be a discrepancy between the calculation of depreciation for Accounting purposes and the calculation of depreciation for Taxation purposes. This is due to different formulas used for Taxation legislation and Accounting legislation, the key variables being:

• The number of days held including the leap year; and
• The inclusion of the Motor Vehicle Cost limit.

For taxation calculations, where the asset has been held for the full the leap year, the days held can extend to 366/365 instead of 365/365.

To calculate decline in value for a Leap Year:

To calculate decline in value using the Diminishing value (DV) method: Opening Written Down Value (OWDV) * Rate * Days held / 365

To calculate decline in value using Prime Cost (Straight Line): Cost * Rate * Days held / 365 (where rate = 100% / Effective life.)

As the calculation of decline in value is based around the number of days held, where the asset is not held for the whole year the leap year does not affect the calculation.

The examples below use the following:

• Cost = $10,000
• Depreciation rate = 10%
• Effective Life = 10 years (i.e. 100% / 10 = 0.1)
• OWDV = $9,000

Example 1: Asset held for a full year.

Example 2: Asset held for a portion of the year:

In the following example, the asset has been held for 130 days (i.e. 130 days out of 365).