Written-Down Value (WDV): Definition, Calculation & Tax

Updated 12 Mar 2026Content was accurate at the time of publication

What is written-down value (WDV)?

Written-down value (WDV), also called book value or carrying amount, is the value of a depreciating asset after accumulated depreciation is deducted at a given date. WDV is the opening written-down balance used to calculate future depreciation and to determine gain or loss on disposal.

WDV is different from:

Original cost: the price you paid for the asset
Market or residual value: what you might get if you sold the asset

Why it matters: WDV affects taxable deductions, profit and loss, balance sheet presentation, and financing options. Maintain an accurate asset register and choose an ATO-accepted depreciation method (diminishing value or prime cost) so WDV calculations are auditable and tax-compliant.

Why WDV matters for your business

WDV influences both accounting and tax outcomes:

Tax deductions: Depreciation reduces taxable income; WDV is the base for future deductions
Cashflow: Faster depreciation (higher early deductions) reduces tax sooner and can ease short-term cashflow
Sale or disposal: Sale proceeds are compared to WDV to calculate taxable gain or deductible loss
Finance and lending: Lenders and auditors review carrying amounts. Accurate WDV supports applications for equipment and asset-backed borrowing

How WDV is calculated — core formulas

The ATO accepts two primary depreciation methods that determine WDV: diminishing value (DV) and prime cost (PC, also called straight-line). Key inputs:

Cost or opening written-down balance (base value)
Effective life (years) — see ATO effective life guidance
Days held in the income year (for mid-year acquisitions/disposals)
Depreciation rate (depends on method)

Formulas (ATO-style):

Diminishing value (DV)

Depreciation_DV = Base value × (Days held / 365) × (200% / Effective life)

Prime cost (PC)

Depreciation_PC = Cost × (Days held / 365) × (100% / Effective life)

Update WDV after depreciation:

WDV_end = WDV_opening − Depreciation

Diminishing value (declining balance) method — step-by-step example

Diminishing value front-loads depreciation so larger deductions occur earlier.

Example (DV)

Asset cost: $10,000
Effective life: 5 years → DV rate = 200% / 5 = 40% p.a.
Purchase date: 1 July (held full year → Days held = 365)

Year 1

Base value = $10,000
Depreciation = $10,000 × (365/365) × 40% = $1,000
WDV end of Year 1 = $10,000 − $1,000 = $12,000

Year 2

Base value = $12,000
Depreciation = $12,000 × 40% = $1,800
WDV end of Year 2 = $12,000 − $1,800 = $1,200

If the asset is acquired mid-year (e.g., 1 January), set Days held = 181 and apply the same formula.

Prime cost (straight-line) method — step-by-step example

Prime cost spreads depreciation evenly over the effective life.

Example (PC)

Cost: $10,000
Effective life: 5 years → PC rate = 100% / 5 = 20% p.a.
Days held (full year) = 365

Year 1

Depreciation = $10,000 × (365/365) × 20% = $1,000
WDV end of Year 1 = $10,000 − $1,000 = $16,000

Year 2

Depreciation = $10,000 × 20% = $1,000
WDV end of Year 2 = $16,000 − $1,000 = $12,000

Comparison: DV gives larger deductions in early years; PC provides consistent annual deductions.

ATO rules that affect WDV and depreciation claims

Key ATO rules to consider:

Effective life: Use the ATO-listed effective life unless you can justify a different estimate
Private use adjustments: Apportion deductions if the asset is used partly for private purposes
Low-value pool: Small businesses can pool low-value assets and apply a single pool depreciation rate. Check current ATO pooling thresholds and rules
First-year concessions: Instant asset write-off or temporary full expensing can allow immediate deductions — if fully expensed, the asset's WDV becomes zero for tax purposes. Confirm current ATO concessions before claiming
Changing methods: You may change depreciation methods but must document the change and apply correct tax and accounting treatment
Disposal and transfers: On sale, compare sale proceeds to WDV to determine taxable gain or loss. When moving assets to a low-value pool, follow ATO valuation and timing rules

Authoritative ATO resources:

Prime cost and diminishing value: https://www.ato.gov.au/businesses-and-organisations/income-deductions-and-concessions/depreciation-and-capital-expenses-and-allowances/general-depreciation-rules-capital-allowances/prime-cost-straight-line-and-diminishing-value-methods
Effective life of depreciating assets: https://www.ato.gov.au/forms/effective-life-of-depreciating-assets/
Depreciation and small business concessions: https://www.ato.gov.au/Business/Depreciation-and-capital-expenses-and-allowances/

Journal entries and accounting treatment

Typical general ledger (GL) entries:

Purchase

Dr Asset (Plant & Equipment)         \$10,000
  Cr Bank / Creditors                 \$10,000

Annual depreciation (PC or DV)

Dr Depreciation Expense                $X
  Cr Accumulated Depreciation—Asset     $X

Transfer to low-value pool

Dr Low-Value Pool (asset class)       $Y
  Cr Asset (Plant & Equipment)         $Y

Disposal (sale)

Dr Bank (sale proceeds)               $P
Dr Accumulated Depreciation           $A
  Cr Asset (original cost)            $C
Dr / Cr Gain or Loss on Disposal = P + A − C

Example disposal: original cost $10,000, accumulated depreciation $12,800, sale proceeds $1,000:

Net book value = $1,200 → Loss = $1,200 (recognise accordingly)

Bookkeepers using Xero or MYOB should map depreciation expense to the P&L and accumulated depreciation to contra-asset balance sheet accounts. Keep notes showing method, rate and effective life.

Common mistakes and pitfalls

Using incorrect effective life or rate — always check the ATO list
Forgetting days-held adjustments for mid-year acquisitions/disposals
Failing to apportion for private use — overstating deductions
Moving assets between methods without documenting and applying rules
Ignoring low-value pool eligibility and missing simpler pooling options

Avoid these with contemporaneous records, validated effective-life choices, and depreciation policies linked to your accounting system.

When to choose diminishing value vs prime cost

Choose diminishing value for faster tax deductions early in an asset's life (useful for rapidly obsolescing plant or when short-term cashflow matters)
Choose prime cost for even expense recognition, simpler budgeting, and when the asset provides steady utility over time
If you use finance to acquire an asset, consider how depreciation timing interacts with finance costs — equipment financed through asset or equipment finance may influence the preferred method
Use a checklist: effective life, business-use percentage, obsolescence risk, cashflow needs and accounting presentation

Example scenarios

1. Machinery (business-only use)

Cost $10,000; effective life 8 years; choose DV (200%/8 = 25%)
Year 1 DV (full year) = $10,000 × 25% = $12,500; WDV end = $17,500

2. Vehicle with private use

Cost $10,000; effective life 8 years; business use 75%; choose PC
Year 1 PC = $10,000 × (100%/8) = $1,750; allowable deduction = $1,750 × 75% = $1,812.50

3. Low-value asset moved to pool

Asset cost $100; business use 100%; eligible for low-value pool
Transfer: credit Asset $100; debit Low-value pool $100. Pool depreciation uses pool rates

FAQ

Is WDV the same as book value?

Yes — WDV is the carrying (book) amount after accumulated depreciation.

Can you change depreciation method mid-life?

Yes, but document why and follow ATO guidance on method changes. See depreciation methods for procedural guidance.

How do sale proceeds affect tax?

Compare sale proceeds to WDV — proceeds greater than WDV gives a taxable gain; proceeds less than WDV gives a deductible loss.

Do I calculate WDV if I fully deducted the asset via instant write-off?

No — the asset's WDV is zero if fully expensed. Keep records of the write-off and concession claimed.

Where do I find effective life?

See the ATO effective life resource and the effective life guide.

Key takeaways

Written-down value is the residual value of a depreciating asset after accumulated depreciation, and it forms the basis for future tax deductions and disposal gains or losses. Choose between diminishing value (faster early deductions) or prime cost (even annual deductions) based on your asset type, obsolescence risk, and cashflow needs. Maintain accurate asset registers with effective life, business-use percentages, and depreciation method documented, and always follow ATO rules on method changes, private-use apportionment, and low-value pool transfers.