The effective life, measured in years, will naturally depend on the kind of asset, how it is used and the conditions under which it is used. The ATO makes its determination of effective life for different kinds of assets after research into how long it will take the asset to wear out according to an assumed usage level.
How long an asset is considered to last, its “ useful life“, determines the rate for deducting part of its cost each year. Thus depreciating assets require a useful life estimate. Depreciation rates are based on the effective life of an asset, unless a write-off rate is prescribed for some other purpose, such as the small business incentives.