A worked depreciation schedule example for a small business, year by year, with the small business pool, instant asset write-off and how lenders read it.
Business Owners Hub
Depreciation Schedule · Worked Example · Lender Read
A joinery business buys a panel saw, two laptops and a shop fit out in the same year. This is the depreciation schedule those three purchases produce, year by year, what the small business rules change, and how a lender reads it when the owner applies for finance.
Quick Answer
A depreciation schedule lists each business asset with its cost, its decline in value each year and what is left. Your accountant uses it to claim the deduction, and a lender uses it to see how much of a profit drop is a paper expense rather than cash going out. The depreciation schedule glossary entry covers the definition. The worked example below shows one small business schedule over three years, then how lenders treat it when they assess serviceability.
Also called: tax depreciation schedule, fixed asset depreciation schedule, asset register. Strictly, the asset register lists what you own and the schedule adds the yearly decline in value, but most owners and accountants use the names loosely.
What does a business depreciation schedule look like?
A business depreciation schedule looks like a table with one row for each asset and columns for its cost, the date it was first used, the method, and its opening value, decline in value and closing value for the year. Every depreciating asset the business claims should have a row, from a forklift down to a laptop.
The layout changes between accounting packages and accountants, but the columns below turn up in almost every version. The right hand column is the part most owners never think about: what a credit assessor takes from each one.
| Column | What it records | What a lender reads from it |
|---|---|---|
| Asset description | What the asset is, often with a serial or register number | Whether the asset is real and still used in the business |
| Date first used | When the asset was first used or installed ready for use, which starts the decline in value | Whether a large purchase lands in the year being assessed |
| Cost | Purchase price plus the costs of getting it working, usually net of GST for a registered business | The size of the investment, and whether finance sits against it |
| Method and rate | Diminishing value or prime cost, and the effective life behind the rate | Usually little; lenders rarely question the method your accountant chose |
| Opening value | The value carried forward from the end of last year | How much of the asset base is left to depreciate |
| Decline in value | The deduction claimed for the year | The figure a lender may add back to profit |
| Closing value | Opening value less the decline in value | A rough tax value of the assets, not what they would sell for |
| Disposal | Sale or scrap value, and any balancing adjustment | One-off gains or losses that distort a single year's profit |
How does one business's depreciation schedule run year by year?
One business's depreciation schedule runs year by year by carrying each asset's closing value forward as the next year's opening value, until the asset is fully written down or sold. Here is a joinery business that bought three things in the same year: a panel saw for $40,000, two laptops at $2,400 each, and a $30,000 shop fit out.
To keep the arithmetic readable, the example assumes all three were first used on the first day of the income year, so no part-year apportioning applies, and that the business uses the general depreciation rules rather than the small business pool. The rates are illustrative, not ATO effective lives: the saw on diminishing value at 20 per cent, the laptops on prime cost over three years, and the fit out on prime cost at 10 per cent. These are example figures only.
| Asset and year | Opening value | Decline in value | Closing value | Note |
|---|---|---|---|---|
| Panel saw, year 1 | $40,000 | $8,000 | $32,000 | Diminishing value, illustrative rate |
| Panel saw, year 2 | $32,000 | $6,400 | $25,600 | Smaller deduction each year |
| Panel saw, year 3 | $25,600 | $5,120 | $20,480 | Still on the books, still working |
| Two laptops, year 1 | $4,800 | $1,600 | $3,200 | Prime cost, same deduction each year |
| Two laptops, year 2 | $3,200 | $1,600 | $1,600 | Two thirds written down |
| Two laptops, year 3 (sold) | $1,600 | $1,100 balancing adjustment | Nil | Sold at the start of year 3 for $500; the shortfall below opening value is deducted |
| Shop fit out, year 1 | $30,000 | $3,000 | $27,000 | Prime cost, illustrative rate |
| Shop fit out, year 2 | $27,000 | $3,000 | $24,000 | Same deduction each year |
| Shop fit out, year 3 | $24,000 | $3,000 | $21,000 | Split between asset types set by your accountant |
Add the rows up and the business claims $12,600 in year 1, $11,000 in year 2 and $9,220 in year 3, none of which left the bank account in those years. The cash went out when the assets were bought, or goes out as loan repayments if they were financed.
How do the opening value, decline in value, closing value columns link up?
The three columns link up in a chain: opening value, decline in value, closing value, then that closing value becomes next year's opening value. If a schedule's opening figures do not match last year's closing figures, something was added, sold or corrected in between, and a lender reading two years of accounts side by side will notice.
The fit out row is the one most likely to look different in a real schedule. Part of a fit out can count as capital works rather than a depreciating asset, which is claimed under different rules, so accountants often split it across several lines.
How does a depreciation schedule work with ATO effective life and the two methods?
A depreciation schedule works by spreading each asset's cost over its effective life, using one of the two methods the ATO allows: diminishing value or prime cost. Effective life is how long the asset can be used to earn income. The ATO publishes effective lives for most asset types, and a business can instead work out its own estimate if it has a reason to.
- Diminishing value applies a rate to the shrinking balance, so the deduction is bigger in the early years and tapers off, like the panel saw above.
- Prime cost applies a flat share of the original cost each year, so the deduction is the same every year, like the laptops and the fit out.
Both methods claim the same total over the asset's life; they differ only in timing. The depreciation glossary entry covers the general idea. Vehicles follow the same logic with extra limits of their own, which the business vehicle depreciation schedule post covers. Where equipment is bought on finance, the chattel mortgage, balloon, GST and depreciation post shows how the loan and the schedule sit side by side.
How do the small business pool and instant asset write-off change the schedule?
The small business pool and the instant asset write-off change the schedule by shrinking it: cheaper assets are written off in the year they are first used, and most other assets are grouped into one pool instead of being tracked one by one. Only businesses that choose the simplified depreciation rules use them.
On the ATO's instant asset write-off page (last updated 28 August 2026, read 13 November 2026), businesses with an aggregated turnover under $10 million that apply the simplified rules can immediately write off an asset costing less than $20,000 that was first used or installed ready for use on or after 1 July 2023. The limit applies to each asset, not to the year's total.
The ATO's simpler depreciation rules page (last updated 28 August 2026, read 13 November 2026) covers the rest. Assets costing the limit or more go into the small business pool, which is deducted at 15 per cent in the year the asset is first used and 30 per cent each year after. If the pool balance at the end of the year, before that year's deduction, is below the write-off limit, the whole balance can be written off. The limit and its dates have changed many times, so check the ATO pages for the year you are claiming. The instant asset write-off glossary entry has the background.
Run the joinery business through those rules and the schedule looks very different. Each laptop costs less than the limit, so both are written off in year 1 for $4,800. The panel saw costs more, so it goes into the pool: $6,000 in year 1, then 30 per cent of the remaining $34,000, or $10,200, in year 2. The fit out depends on how much of it is capital works, which the simplified rules leave out.
Some assets are excluded from the simplified rules altogether, including capital works such as buildings and structural improvements, assets leased out for more than half the time, assets used in research and development activities, horticultural plants, and software allocated to a software development pool. Other software is not excluded. The ATO lists them on its simpler depreciation assets and exclusions page.
The catch for a business owner is timing. A year with several purchases under the limit becomes a big write off year: taxable profit drops sharply even though the business traded normally. That matters when a lender looks at the same year's accounts.
Sources: Australian Taxation Office, Instant asset write-off for eligible businesses, last updated 28 August 2026; Australian Taxation Office, Simpler depreciation rules for small business, last updated 28 August 2026; Australian Taxation Office, Assets and exclusions, last updated 27 May 2026. All read 13 November 2026.
Who prepares a depreciation schedule, and how does it link to the asset register?
Your accountant or registered tax agent usually prepares the depreciation schedule, building it from the asset register behind the schedule, which you or your bookkeeper keep up to date. The register is the list of what the business owns, with invoices, serial numbers and dates. The schedule is the tax calculation built on top of it.
Most accounting software has a fixed asset module that does both: you record the purchase, attach the invoice, and the software runs the yearly decline in value your accountant has set up. The weak point is almost always the register. A tool bought on a personal card, a trade-in that was never recorded, or equipment scrapped without a note all leave the schedule out of step with what is actually in the workshop.
One line on a document that shares the name: a quantity surveyor's tax depreciation schedule for an investment property covers the building and its fixtures. It is a different report from the business asset schedule in this post.
How do lenders read depreciation when they assess profit?
Lenders read depreciation as an expense that cuts profit without taking cash out of the business that year, so many add it back to net profit when they work out what the business can afford to repay. The short version: depreciation is usually added back, but how much varies by lender. Some add back all of it, some only part, and some treat a large one-off write-off differently from normal yearly depreciation.
That is why a lender reads the schedule to answer three questions. Is profit down because of a paper expense or because trading got worse? Are the assets on the balance sheet real and still in use? And is there finance against those assets that already takes up part of the business's cashflow?
In our own files, the question that comes back most often from credit teams is why profit fell in the year the business bought equipment. The answer is usually sitting in the schedule, but if nobody sends it, the assessor sees a weaker year and nothing to explain it. A big write off year handled this way can be read as reinvestment rather than decline, which is a better story when you are applying for a working capital loan to fund the growth that equipment was bought for.
Reads cleanly to a lender
- Every asset matches a line on the asset register
- Large purchases dated and backed by an invoice or finance contract
- Disposals shown with the sale price
- The schedule's total ties to the depreciation line in the profit and loss
Makes a lender ask questions
- A depreciation line in the accounts with no schedule behind it
- Assets sold years ago still being depreciated
- A large write-off with no note explaining what was bought
- Financed equipment on the schedule but no loan on the balance sheet
Also in our own files: the last card item is more common than owners expect. When an equipment loan is missing from the accounts, the lender finds it on the credit file anyway, and the gap costs more time than the loan itself. If the purchase was funded through low doc asset finance, make sure the contract and the schedule line up.
What should you send a lender about your assets and depreciation?
You should send a lender your recent financial statements with the depreciation schedule or fixed asset note attached, plus the paperwork for any large purchase in the latest year. Most lenders typically ask for the last two years of accounts, though what they want varies by lender and loan size.
- Ask your accountant for the schedule. It is usually produced with the tax return, even if it is not printed in the accounts.
- Mark the big purchases. A short note listing what was bought, when, and how it was paid for saves the assessor guessing.
- Attach finance contracts. Any equipment loan or lease on the schedule should have its contract, so repayments can be counted correctly.
- Explain the write-off year. If one year carries a large instant write-off or pool claim, say so in a sentence and point to the schedule.
- Check the register is current. Remove sold or scrapped assets before the accounts go out.
The how to apply for a business loan guide covers the rest of the document list, and the working capital loans guide explains how lenders size facilities once profit is settled. More finance guides for owners sit in the Business Owners Hub.
A depreciation schedule is one row per asset, carrying opening value, decline in value, closing value forward each year until the asset is written down or sold. The small business pool and the instant asset write-off can collapse it into a few lines and a big write off year, which cuts taxable profit without touching cash. Lenders usually add depreciation back, but only if they can see it, so the schedule and the asset register behind it are worth sending with every application.
Key takeaway: Send your depreciation schedule with your accounts, and flag any big write-off year, so the lender reads lower profit as investment, not decline.Frequently Asked Questions
The ATO does not give you a depreciation schedule; it sets the rules your schedule has to follow, such as effective lives and the two methods. Your accountant or your accounting software builds the schedule for each depreciating asset you own. The ATO's simpler depreciation pages explain the small business options.
You can get a sample depreciation schedule for your business from your accountant, from the fixed asset report in your accounting software, or from a worked example like the one in this post. The depreciation schedule glossary entry explains the terms. A sample only shows the layout; your own schedule needs your actual costs and dates.
Your accountant usually prepares your depreciation schedule each year as part of your tax return and financial statements. They work from the asset purchases and sales you or your bookkeeper record, so a missing invoice usually means a missing row. Ask for a copy, because lenders sometimes want to see it.
A big write off year can make a loan application look weaker at first glance, because taxable profit drops in the year of the write-off. Many lenders add depreciation and write-offs back when they assess serviceability, but how much they add back varies by lender. Explaining the instant asset write-off claim upfront, with the schedule attached, usually helps.
A home based business needs a depreciation schedule, or at least a record of cost and decline in value, for any business assets it claims, such as computers, tools or equipment. Claims relating to the home itself are a separate question for your accountant. Keeping the record also lets a lender match the depreciation line in your accounts to real assets.
FBAA Accredited
