Depreciation Rate for Utes and Vans in Australia (2026 ATO Guide)
What Is the Depreciation Rate for a Ute or Van in Australia?
According to the Australian Taxation Office (ATO), utes and vans have an effective life of 8 years. This gives you two depreciation rate options:
| Method | Rate | How It Works |
|---|---|---|
| Diminishing Value | 25.00% | Higher deductions in earlier years |
| Prime Cost | 12.50% | Equal deductions each year |
Diminishing value rate = 200% ÷ effective life (200% ÷ 8 = 25.00%). Prime cost rate = 100% ÷ effective life (100% ÷ 8 = 12.50%).
Worked Example: $55,000 Ute or Van
Purchase a ute or van for $55,000 on 1 July 2025 (start of the financial year) for a full-year deduction:
Diminishing Value Method (25.00%)
| Financial Year | Opening Value | Deduction | Closing Value |
|---|---|---|---|
| 2025–26 | $55,000 | $13,750 | $41,250 |
| 2026–27 | $41,250 | $10,312 | $30,938 |
| 2027–28 | $30,938 | $7,734 | $23,204 |
| 2028–29 | $23,204 | $5,801 | $17,403 |
| 2029–30 | $17,403 | $4,351 | $13,052 |
| 2030–31 | $13,052 | $3,263 | $9,789 |
| 2031–32 | $9,789 | $2,447 | $7,342 |
| 2032–33 | $7,342 | $1,836 | $5,506 |
| 2033–34 | $5,506 | $1,376 | $4,130 |
| 2034–35 | $4,130 | $1,032 | $3,098 |
Prime Cost Method (12.50%)
| Financial Year | Opening Value | Deduction | Closing Value |
|---|---|---|---|
| 2025–26 | $55,000 | $6,875 | $48,125 |
| 2026–27 | $48,125 | $6,875 | $41,250 |
| 2027–28 | $41,250 | $6,875 | $34,375 |
| 2028–29 | $34,375 | $6,875 | $27,500 |
| 2029–30 | $27,500 | $6,875 | $20,625 |
| 2030–31 | $20,625 | $6,875 | $13,750 |
| 2031–32 | $13,750 | $6,875 | $6,875 |
| 2032–33 | $6,875 | $6,875 | $0 |
Which method is better? Diminishing value gives you $13,750 in Year 1 vs $6,875 with prime cost. Most small businesses prefer diminishing value for the bigger upfront deduction.
First-Year Pro-Rata Rule
If you purchase the ute partway through the financial year, your first-year deduction is pro-rated based on the number of days you held the asset.
Example: Buy a ute or van for $55,000 on 1 January 2026 (181 days remaining in the FY).
- Diminishing value: $55,000 × 25.00% × (181/365) = $6,818
- Prime cost: $55,000 × 12.50% × (181/365) = $3,409
Instant Asset Write-Off
If your ute costs less than the instant asset write-off threshold ($20,000 for the 2024–25 income year), you may be able to deduct the entire cost immediately rather than depreciating over 8 years. This applies to small businesses with aggregated turnover under $10 million.
Always check the current ATO guidance as thresholds can change each financial year.
What Counts as “Utes and Vans” for ATO Purposes?
The ATO’s 8-year effective life applies to:
- Utes and dual-cab utes
- Panel vans and delivery vans
- Light commercial vehicles over 1 tonne carrying capacity
Unlike cars, utes and vans with a carrying capacity over 1 tonne are NOT subject to the car depreciation limit, so you can depreciate the full purchase price.
How to Claim Depreciation
- Must be used for business purposes. Only claim the business-use percentage. If you use the ute 70% for work, claim 70% of the depreciation.
- Choose your method — diminishing value or prime cost. You must stick with the same method for the life of that asset.
- Keep records — purchase receipt, proof of business use percentage, and your depreciation schedule.
- Report in your tax return — include the deduction amount in your business expenses or work-related deductions.
Calculate Your Depreciation
Use our free depreciation calculator to get an instant depreciation schedule — just select “Ute / Van” and enter the purchase price and date.
Frequently Asked Questions
What is the ATO effective life for utes and vans?
The ATO sets the effective life at 8 years for utes and vans.
Should I use diminishing value or prime cost?
Most small businesses use diminishing value because it gives a bigger deduction in the first year ($13,750 vs $6,875 on a $55,000 ute).
Can I claim the full cost as an immediate deduction?
If the ute costs less than the instant asset write-off threshold and you are an eligible small business, yes — you can deduct the full cost in the year of purchase. If you also use it personally, only claim the business-use percentage.
What if I sell or dispose of the ute before it’s fully depreciated?
You’ll need to do a balancing adjustment. If you sell it for more than the written-down value, the difference is assessable income. If you sell for less, you can claim the remaining amount as a deduction.