Division 43 capital works deduction
An Australian tax deduction for the construction cost of the structural elements of a building used to produce assessable income, claimable over 25 or 40 years depending on construction date and use.
Division 43 of the Income Tax Assessment Act 1997 allows owners of income-producing buildings to deduct a portion of the original construction cost each year. For residential rental buildings, the deduction is generally 2.5% per year over 40 years, provided construction began after 17 July 1985.
The deduction applies to the structural elements — walls, floors, roof, permanent fixtures — as distinct from removable plant and equipment, which is handled under Division 40. Any Division 43 deductions claimed reduce the cost base of the property for capital gains tax purposes.
The original construction cost is used for the calculation, not the purchase price. Where that cost is not known to the owner, a quantity surveyor’s report is normally required to establish it.
Primary source
Australian Taxation Office (ATO) — Capital works deductions →Last reviewed 15 April 2026. Rates, thresholds, and deadlines change — always verify against the primary source before making decisions.