Division 40 Plant & Equipment

Definition

Division 40 of the ITAA 1997 covers depreciating assets — items that can be removed from a property and have a limited effective life. This includes carpets, curtains, blinds, air conditioners, hot water systems, ovens, dishwashers, smoke alarms, and light fittings. Each item depreciates at a rate set by the ATO based on its effective life. Note: for properties where contracts were exchanged after 9 May 2017, non-original Div 40 items (installed by a previous owner) cannot be claimed by subsequent owners.

Div 40 deductions are often highest in the first few years of ownership because new items depreciate fastest. Replacing old items (a new split system, new carpet) creates fresh deductions. For properties built after May 2017, only items the current owner installs are claimable under Div 40.

Your 2019 apartment has a split-system AC (effective life 10 years, cost $3,500), new carpet ($4,800, 8 years), and a hot water system ($2,200, 12 years). Year one Div 40 deductions: roughly $1,500.

ITAA 1997, Division 40

Related terms

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