Also called: Useful life
Effective life
Effective life is the period an asset is expected to be usable for producing income, used to work out depreciation deductions. The ATO publishes determinations for many asset types, and a business may instead self-assess an asset's effective life.
What is an effective life?
Effective life is the period an asset is expected to be usable for producing income, used to work out depreciation deductions. The ATO publishes determinations for many asset types, and a business may instead self-assess an asset's effective life.
Example
An ATO determination might give a commercial coffee machine an effective life of around ten years and a laptop about three.
Why it matters
It also influences finance terms, because lenders rarely write a loan term longer than an asset's working life.