DD&A Explained: Depreciation, Depletion & Amortization for Australian Businesses 2025

Depreciation, depletion, and amortization—collectively known as DD&A—are more than just lines on a balance sheet. For Australian businesses, these accounting methods are central to effective asset management, strategic tax planning, and long-term financial health. With the ATO updating asset depreciation rules for the 2024–25 financial year, understanding DD&A has never been more critical. Whether you’re a CFO, a small business owner, or a startup founder, mastering these concepts can unlock real value for your business.

What is DD&A? Breaking Down the Basics

DD&A stands for Depreciation, Depletion, and Amortization—three accounting techniques that spread the cost of assets over their useful lives. Here’s how each works in practice:

• Depreciation: Applies to tangible assets (think: vehicles, computers, manufacturing equipment). For example, a delivery van bought for $60,000 in July 2024 might be depreciated over five years, reducing taxable income each year.

• Depletion: Used for natural resources—like mining companies accounting for iron ore, or farmers with timberland. As resources are extracted or harvested, their book value is gradually reduced.

• Amortization: Targets intangible assets, such as patents, trademarks, or software licenses. If your business purchased a patent in 2025 for $120,000 with a 10-year life, you’d amortize $12,000 annually.

Why does this matter? Because DD&A impacts not just your P&L, but also your cash flow, borrowing capacity, and tax bill. The right approach can mean the difference between staying competitive and missing out on vital deductions.

2025 Policy Updates: What’s Changed for Australian Businesses?

This year brought several key updates for DD&A in Australia, driven by both economic conditions and government incentives for business investment:

• Temporary Full Expensing Ends: The ATO’s popular temporary full expensing incentive, which allowed businesses to immediately write off the full cost of eligible assets, ended on 30 June 2024. From 1 July 2024, businesses must revert to standard depreciation schedules—making it essential to reassess asset purchases and cash flow forecasts.

• Instant Asset Write-Off Thresholds: For the 2024–25 tax year, the instant asset write-off threshold has been set at $20,000 for small businesses with an aggregated turnover of less than $10 million. Assets over this amount must now be depreciated over their effective life.

• R&D and Intangible Asset Amortization: The government’s 2025 budget included extra incentives for R&D investment, but also clarified that software development costs (unless immediately deductible) must be amortized over five years, aligning with international standards.

• Resource Sector Depletion: Mining and energy companies face more scrutiny, with the ATO emphasizing accurate calculation of depletion rates as commodity prices remain volatile in 2025.

These changes mean that businesses need to revisit their asset registers, review depreciation methods, and ensure compliance with the latest rules to avoid costly mistakes or missed deductions.

Real-World Applications: DD&A in Action

Let’s see how DD&A plays out for different types of Australian businesses in 2025:

• Tradie Fleet Upgrade: A plumbing company replaces its ute fleet with electric vehicles, each costing $55,000. With the instant asset write-off capped at $20,000, the remaining $35,000 per vehicle is depreciated over 5 years, reducing the firm’s taxable profit year-on-year.

• Tech Startup: A SaaS company invests $100,000 in developing proprietary software. Under new rules, this amount must be amortized over five years—$20,000 per year—streamlining expenses and aligning with investor expectations for asset transparency.

• Mining Operator: An iron ore miner updates its depletion schedules to reflect new extraction rates and fluctuating commodity prices. With the ATO’s focus on accuracy, the miner ensures each tonne removed is properly accounted for, protecting profits and avoiding penalties.

Each scenario demonstrates how DD&A isn’t just theoretical—it shapes real business decisions, from equipment upgrades to IPO readiness and beyond.

Maximising Value from DD&A in 2025

To get the most from DD&A, Australian businesses should:

• Regularly update asset registers and review useful lives of assets, especially as technology and regulations evolve.

• Consult with accountants on the most effective depreciation methods (diminishing value vs. prime cost) for your sector.

• Take advantage of any available tax incentives, such as the instant asset write-off, before they change.

• Ensure accurate record-keeping for natural resource depletion, given ongoing ATO scrutiny.

• Align amortization of intangibles with both tax law and investor reporting standards.

Staying proactive on DD&A means more predictable cash flow, lower tax bills, and better business decisions—regardless of sector or size.