Division 43 (Div43) Depreciation Allowances

Cartoon Man with Div 43 Written Next To Him.

Income Tax Assessment Act 1997 - Division 43 (Deductions for capital works)

Division 43 (Div43) allows deductions for buildings and structural improvements.

Owners of capital works (a building) that is income-producing within a financial year are entitled to claim deductions under Division 43 for the time that the building was used to produce an income.

Owners include individual investors, self-managed superannuation funds (SMSF), property funds, trusts and of course companies.


Capital Works are building and engineering works that create an asset, including the construction and installation of facilities and fixtures that are a part of that asset.

Preliminary expenses such as architect fees, engineering fees, surveying fees, foundation excavation expenses and costs of building permits also form part of the construction expenditure.

(a) begun in Australia after 21 August 1979; or
(b) begun outside Australia after 21 August 1990.

AssetAccountant™ – saving you from spreadsheets since 2019

Structural Improvements

s43-20: For works begun after 26 February 1992, this division also includes capital works that are structural improvements, or extensions, alterations or improvements to structural improvements, whether they are in or outside Australia.

Some examples of structural improvements are:

(a) sealed roads, sealed driveways, sealed car parks, sealed airport runways, bridges, pipelines, lined road tunnels, retaining walls, fences, concrete or rock dams and artificial sports fields; and

(b) earthworks that are integral to the construction of a structural improvement …, for example, embankments, culverts and tunnels associated with a runway, road or railway.

s43-20 (4) goes on to specify exclusions of specific earthworks. Earthworks not integral to a structure don’t qualify for a deduction.

So building the foundations of a structure qualifies for a deduction. But the building of artificial landscapes, underground tanks and dirt tracks do not.


The deduction is either 2.5% of the construction expenditure over 40 years. Or it is 4% over 25 years. But neither commences until construction reaches completion (specified in s43-30).

The rate that applies (2.5% or 4%) depends on the date construction commenced. And it depends on the type of construction expenditure incurred.

The rules in s43-145, and s43-200 to 43-220 for determining the rate are complex. But to give you one example. The 2.5% rate applies to capital expenditure incurred on the construction of a residential rental property that commenced after 26 February 1992.


Construction expenditure is capital expenditure incurred to construct capital works. It does not include capital expenditure on acquiring land, demolishing existing structures, landscaping or plant; s43-70.

Therefore, capital allowance deductions for expenditure on buildings or structural improvements that are also regarded as ‘plant’ are generally provided for under Div40 and not Div43.

Alan Fitzgerald - Practice Connections Team Member

I have seen a lot of niche products come and go but the one constant has been the lack of a decent fixed asset register. I was recently invited to see the latest incarnation and it did not disappoint. I am confident that both accounting firms and corporate clients will be lining up to use it – I have already been extolling the solutions’ virtues.

Alan FitzGerald - Founder, Practice Connections


Introduction to AssetAccountant

Fixed asset depreciation software: Introduction When you create a free trial account with AssetAccountant, you’ll be offered the opportunity to explore a demo register that

Read More »
Sage Intacct Integration on a Mockup Computer Screen

Sage Intacct Integration

Fixed Asset Software For Sage Intacct AssetAccountant™ was approached by Sage Intacct in 2020 to be the recommended fixed assets engine for their ERP clients.

Read More »