Library books and periodicals - clarification of depreciation determination

Section EG 4, Income Tax Act 1994 - Basic economic depreciation rate

A taxpayer has asked for clarification of depreciation determination DEP32, published in Tax Information Bulletin Vol.10, No.3 (March 1998) at page 3.  She has asked for the correct depreciation rate applying to those publications that provide an updating service and an annual consolidated version of the publication at the end of each year.  An example being an annual tax cases service, where a bound volume is provided free of charge at the end of the year.

Under section BD 2(1), taxpayers are allowed a deduction for expenditure incurred in deriving their gross income.  That includes expenditure on newspapers, journals, periodical and books relevant to their business.  Subscriptions for newspapers, journals, etc., are generally treated as an expense item, and a full deduction is claimed in the year the expenditure is incurred.  However, books are generally depreciated over their useful life.  Determination DEP32: Tax Depreciation Rates General Determination Number 32 sets out the depreciation rates to be used for library books and periodicals.      

The commentary on that determination distinguishes between books provided as part of a subscription to an updating service, and those books for which a charge is made in addition to the subscription fee.  To clarify the correct position on this issue:

• If the annual consolidated version is provided as part of the subscription fee, the full subscription fee may be written off in the year of purchase.
• If the subscription fee provides only the updating service, and the annual consolidated version must be purchased separately, or where additional copies of the annual consolidated version are purchased (or only the annual consolidated version is required), the annual consolidated version should be treated as "other books", with an estimated useful life of 10 years.

Taxpayers should also be aware of the provisions of section EG 16, which allow a full deduction for assets costing $200 or less. In these cases DEP32 cannot require those assets to be depreciated