Division 43 Capital Works Deductions

Definition

Division 43 of the ITAA 1997 allows property owners to deduct the construction cost of a building over its effective life — typically 2.5% per year (40 years) for residential properties built after 15 September 1987. This covers the structural elements: walls, roof, flooring, doors, and fixed improvements like driveways and fencing.

Div 43 deductions are non-cash — you don't actually spend money each year, yet you reduce your taxable income. On a $400,000 construction cost, that's $10,000/year in deductions. Many investors miss these because they don't get a depreciation schedule from a quantity surveyor.

A unit built in 2005 with a construction cost of $320,000 yields a Div 43 deduction of $8,000 per year until 2045. If your marginal tax rate is 37%, that's $2,960 back in your pocket annually — for doing nothing.

ITAA 1997, Division 43 — View on ato.gov.au →

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