Fredo,
An interesting question. It raised questions in my mind, so I did a little research.
I'm not sure if I have my rates correct. The ato site (
http://www.ato.gov.au/content.asp?doc=/content/Individuals/22284.htm&page=6#P215_25397) gives a formula for the depreciation rate which gives a higher rate for diminishing value as against straight line.
Their formula for diminishing value rate is
base value * (days held / 365) * (150% / asset's effective life).
So if an asset has an effective life of 10 years, the diminishing value percentage is 15% pa for every full year.
Their formula for Prime cost rate is
base value * (days held / 365) * (100% / asset's effective life).
So if an asset has an effective life of 10 years, the Prime Cost percentage is 10% pa for every full year.
So, there's a higher rate for reducing balance in earlier years using reducing balance, and a lower rate afterwards- but the number of years you can claim is longer.
For something worth $10,000 with a life of 10 years, you would claim (using diminishing value):
Year 1 $1500
Year 2 $1275
Year 3 $1083.75
Year 4 $921.19
etc.
(After 20 years, you would be claiming $68.40- assuming you had not disposed of the asset).
Using straight line, you would claim $1000 pa every year for 10 years. It would then be completely written down.
My preference would certainly be to use the diminishing value method, to claim the most you can as early as you can.
Once you add the "real" value of the money (allowing for inflation) and the opportunity costs, the diminishing value method seems even more attractive.