Calculate period-by-period adjustments of private assets used in business
When to use it
If you make period-by-period adjustments you make the private use adjustment in the return that covers the time that the goods and services were used privately.
There are two types of adjustments to make:
- adjustments for revenue or expense items, and
- adjustments for capital or asset items.
Revenue or expense items
Revenue or expense items are items used up or sold continuously in the course of your taxable activity. They include such items as raw materials, electricity, insurance, telephone costs and running costs for a car.
Capital or asset items
Capital or asset items are items used to run the business but not expected to be used up in the normal operations of the business. Examples are motor vehicles, computers and machinery.
How to calculate it
How to calculate the adjustment for revenue or expense items
The table below explains how to calculate the adjustment for the revenue or expense item and provides an example.
Scenario:
Tai owns a personal computer which he uses for his partnership to record debtors and creditors. Records show 15% of computer use relates to business. The partnership has a six-monthly taxable period.
| Step | What to do | Example | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 1 |
Work out the percentage of business (taxable) use. |
Business use percentage for the period is 15%. |
||||||||
| 2 |
Add up expenses for the six-month period. Call this E. |
Total expenses including GST involved in running the computer for the six-month period were:
| ||||||||
| 3 |
Multiply E by the business percentage from Step 1. |
$1,025 x 15% = $153.75 | ||||||||
| 4 |
|
$153.75 divide by 9 = $17.08. |
How to calculate the adjustment for capital or asset items
The table below explains how to calculate the adjustment for capital or asset items and provides an example.
| Step | What to do | Example |
|---|---|---|
| 1 |
Work out the percentage of business (taxable) use. |
Business use percentage for the period is 15%. |
| 2 |
Work out the lesser of the:
Call this L. |
The current market value of the computer is $3,000, but Tai bought it at a discounted price of $2,500 (including GST). |
| 3 |
Find out the straight line depreciation rate for the asset. Call this S. |
The general straight line depreciation rate used is 30%. |
| 4 |
|
$2,500 x 30% = $750 $750 divide by 2 = $375 $375 x 15% = $56.25 |
| 5 |
Divide the amount from Step 4 by 9. |
$56.25 divide by 9 = $6.25 |
| 6 |
|
$17.08 + $6.25 = $23.33 |
Find out more
- Calculate a one-off adjustment of private assets used in business
- Calculate the business use of a private motor vehicle
Date published: 17 Apr 2007
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