The federal government is making it more attractive for companies to buy computers -- and other assets categorised as plant and equipment -- by allowing them to depreciate faster.

In today's 2006/07 budget documents, the Treasury raised the diminishing value rate for assets such as computers from 150 percent to 200 percent.

This means that if a company buys a PC from 10 May 2006, it will be able to write off more of that computer's value against income tax over the first three years.

According to the Treasurer, this means the government has recognised that the value of these types of assets diminishes faster in the first couple of years than was previously acknowledged.

"The measure encourages efficient investment by ensuring that depreciation deductions for income tax purposes more closely reflect an asset's actual decline in value," said a statement on the Treasurer's Web site. "By increasing the incentive to invest in new plant and equipment, the measure ensures businesses can keep pace with changes in technology and remain competitive".

Example of depreciation on a new AU$4,000 PC with an effective life of four years. Source: Treasury
	Current arrangements -- 150 percent diminishing value rate		New arrangements -- 200 percent diminishing value rate
Year asset held	Written down value as percentage of purchase price at end of period	Depreciation deduction AU$	Written down value as percentage of purchase price at end of period	Depreciation deduction AU$
1	63	1,500	50	2,000
2	39	938	25	1,000
3	24	586	12.5	500
4	0	977	0	500