Finance teams and IT teams often look at the same laptop and see two different things. On the balance sheet, a two-year-old laptop may be worth nothing. On the resale market, the same device can still be worth a meaningful amount, particularly if it is a business-grade model in good condition.
Understanding the laptop depreciation rate the ATO allows, and where it stops reflecting reality, helps organisations make better decisions about when to refresh, how long to hold retired devices and what to do with them afterwards. This guide covers the ATO effective life for laptops, how the two depreciation methods work, and why the gap between book value and market value matters.
This article is general information only. Speak to your accountant or tax adviser about how the rules apply to your organisation.
What Effective Life Does the ATO Set for Laptops?
The ATO publishes effective life determinations for thousands of asset types in its ruling TR 2022/1. For laptops, notebooks and other portable computers, the effective life is two years.
Businesses can use the Commissioner's determination or, in some cases, self-assess the effective life based on their own circumstances. Most organisations use the ATO figure because it is simpler and brings the deduction forward. The ATO explains both options in its guidance on determining the effective life of an asset.
Two years is short compared with how long a business laptop actually works, which is typically three to five years. We look at the working life question in more detail in how long should a laptop last.
How Laptop Depreciation Is Calculated
There are two methods for working out the decline in value of a depreciating asset.
Prime cost spreads the deduction evenly across the effective life. The asset's cost is multiplied by the days held divided by 365, then by 100% divided by the effective life. For a laptop with a two-year effective life, that works out to 50% of the cost for each full year.
Diminishing value brings more of the deduction into the early years. The base value is multiplied by the days held divided by 365, then by 200% divided by the effective life. With a two-year effective life the rate is 100%, so a laptop held for a full income year can be written down to zero in that year.
Under either method, a business laptop is usually fully depreciated within two years of purchase, and often well before it is retired.
The Instant Asset Write-Off and Smaller Businesses
Smaller organisations may not need to depreciate laptops at all. The ATO confirms that the $20,000 instant asset write-off is now permanent from 1 July 2026 for small businesses with an aggregated turnover under $10 million, allowing an immediate deduction for eligible assets that cost less than $20,000 each.
Mid-sized and enterprise organisations with higher turnover use the general depreciation rules, so the two-year effective life applies. For managed service providers advising clients in both groups, it helps to know which rules each client follows, because it shapes how that client views the value of its devices at refresh time.
Why Zero Book Value Does Not Mean Zero Worth
This is where depreciation and real value part ways. A laptop bought for $2,000 may carry a written-down value of zero after two years, yet a business-grade model in good condition can still attract a buyer at three years old. Apple devices and premium Windows models tend to hold their value longest.
The gap leads to two common mistakes. The first is holding retired laptops in storage because they are "worth nothing" on paper, while their resale value falls every quarter. The second is giving them away or recycling them for free when they could have returned money to the business.
Resale value is shaped by factors that sit outside the depreciation schedule:
- Age and model: newer, business-grade devices hold value longer than older or consumer models.
- Condition: cosmetic grade, battery health and working components all affect the price.
- Lock status: a device still tied to an Apple Account or management service is hard to resell, as we explain in Activation Lock and MDM lock.
- Timing: value declines steadily, so devices sold soon after retirement return more.
What Happens for Tax When You Sell a Retired Laptop
Selling a depreciated laptop triggers what the ATO calls a balancing adjustment event. The ATO's guidance on disposal of a depreciating asset explains the mechanics: if the amount you receive, known as the termination value, is higher than the asset's written-down value, the difference is generally included in assessable income, and if it is lower, the difference is generally deductible.
For most organisations the practical implication is about records. Resale proceeds from retired laptops need to be matched to the right assets, which is far easier when every device comes back with a serial-level report of what was received for it. Your accountant can advise on the right treatment for your circumstances.
Frequently Asked Questions
What is the ATO depreciation rate for a laptop?
With a two-year effective life, the prime cost rate is 50% a year and the diminishing value rate is 100% a year, adjusted for the number of days the laptop is held in the income year.
Can a business claim a laptop immediately?
Small businesses with an aggregated turnover under $10 million can generally claim eligible assets costing less than $20,000 immediately under the instant asset write-off. Larger businesses depreciate laptops over their effective life. Check your position with your adviser.
Do I have to use the ATO's two-year effective life?
Businesses can generally choose between the Commissioner's determination and a self-assessed effective life that reflects their own circumstances. Most use the ATO figure because it is simpler.
Does selling a fully depreciated laptop create taxable income?
Generally, if the sale price is higher than the written-down value, the difference is included in assessable income as a balancing adjustment. Your accountant can confirm the treatment for your organisation.
Turning Written-Down Devices Into Recovered Value
The organisations that get the most from their fleet treat retirement as a planned event rather than a clean-up job. They set the refresh cycle in advance, move retired devices out of storage quickly, and use a disposal process that both returns value and documents it. Our overview of what ITAD is and how it works sets out the steps, and our comparison of device buyback vs traditional ITAD explains which model suits which fleet.
Canopy's Recover service grades every device, returns value through resale and reports on each unit, giving finance teams the records they need for the balancing adjustment and IT teams the proof of certified erasure.
Find out what your written-down devices are really worth.
Use the form on this page to request a device recovery review from the Canopy team.