Straight Line Basis Explained: Depreciation for Aussies in 2025

Depreciation can make or break your business’s financial planning, and in 2025, the straight line basis remains a favourite for its clarity and predictability. Whether you’re running a café in Melbourne, managing a tradie fleet, or tracking assets for a tech startup, understanding how the straight line method works could save you hours of stress — and potentially thousands at tax time.

What Is the Straight Line Basis?

The straight line basis is a method of calculating depreciation where an asset’s value is reduced by the same amount every year over its useful life. It’s the go-to approach for many Australian SMEs because it’s straightforward and easy to justify to the ATO. If you buy a $10,000 van with a useful life of five years, you’d claim $2,000 each year as a depreciation expense — simple as that.

• Formula: (Cost of Asset – Residual Value) / Useful Life
• Result: Equal annual depreciation expense

This method contrasts with approaches like diminishing value, which front-load the expense, or immediate write-offs (popular during COVID-era stimulus, but now more restricted).

Why Australian Businesses Favour Straight Line Depreciation

While there are several approved depreciation methods in Australia, straight line basis remains popular for several reasons:

• Simplicity: Easy to calculate and document, reducing errors and headaches at tax time.
• Predictability: Creates stable, consistent expenses — crucial for cash flow planning and financial forecasting.
• ATO Compliance: The method is accepted for most asset types (except where accelerated write-offs or pooling are required).

For example, office furniture, computers, and vehicles are commonly depreciated using this method. In contrast, high-use or high-tech assets may benefit from accelerated methods if allowed.

2025 Updates: Tax Rules and Depreciation in Focus

The 2025 federal budget has made some important tweaks that affect how businesses approach depreciation:

• Instant Asset Write-Off Threshold: The threshold remains at $20,000 for small businesses with turnover under $10 million, but stricter eligibility checks mean straight line is often the default for assets above this amount.
• ATO Scrutiny: Increased focus on correct asset classification and useful life estimates. The ATO’s new digital tools make it easier to audit depreciation schedules — so accuracy is vital.
• Sustainability Incentives: Certain green assets (like solar panels) may qualify for accelerated deductions, but if not, straight line is still the fallback.

For instance, a small construction firm investing in new excavators in 2025 can only immediately write off the first $20,000 of the purchase price. The remaining value must be depreciated, and straight line often offers the least complicated path.

When Straight Line Isn’t the Best Fit

While the straight line basis suits many scenarios, it’s not always optimal. If an asset loses value quickly early in its life — think IT equipment or some machinery — the diminishing value method might deliver greater upfront tax relief. Additionally, for pooled assets or those subject to special write-off rules, the ATO may require alternative approaches.

But for most office equipment, furniture, and vehicles, especially when the goal is steady expense recognition, straight line keeps things tidy and defensible.

How to Implement Straight Line Depreciation in 2025

1. Identify: Confirm the asset type and check ATO guidelines for its effective life.
2. Calculate: Subtract any expected residual value from the purchase price, then divide by the effective life in years.
3. Record: Document the calculation and keep supporting invoices/asset registers for ATO review.
4. Review Annually: If usage or business circumstances change, update your depreciation schedule accordingly.

Many Australian accounting platforms now automate straight line calculations, but it’s still vital to understand the logic behind the numbers, especially with ATO scrutiny on the rise in 2025.