Capital Works Deduction (Division 43)
Tax & Deductions
A tax deduction for the construction cost of the building structure itself, claimed at 2.5% per year over 40 years.
Full Explanation
Division 43 of the Income Tax Assessment Act allows investors to claim 2.5% of the original construction cost of the building each year. This covers structural elements like walls, floors, roofs, and fixed installations such as built-in cupboards. The building must have been constructed after 15 September 1987 to qualify.
Example
A unit built in 2015 for $300,000 in construction costs allows you to claim $7,500 per year (2.5%) in capital works deductions.
Frequently Asked Questions
What if I do not know the original construction cost?
A quantity surveyor can estimate the original construction cost using current building rates and adjusting for the age of the property. This estimate is accepted by the ATO.
Does a renovation qualify for capital works deductions?
Yes. Structural renovations such as adding a room, new bathroom, or kitchen rebuild qualify for the 2.5% per year deduction from the date the renovation is completed.