Private ruling: Capital works
Published: October 2013
Ruling period: Year ended 30 June 2011 | Year ended 30 June 2012 | Year ended 30 June 2013
Date scheme commenced: 31 January 2011

Ruling: Q1: Are you entitled to a deduction for capital works? | A1: Yes.


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 43 | Income Tax Assessment Act 1997 Subsection 43-25(1)

Reasons for decision: Summary: Section 43 of the Income Tax Assessment Act 1997 (ITAA 1997) provides a deduction for capital works. Capital works includes buildings and structural improvements, and also extensions, alterations or improvements to buildings and structural improvements where a residential property is used for income producing purposes. Subsection 43-25(1) of the ITAA 1997 provides that the rate of deduction for capital works which began after 26 February 1992 for a residential rental property is 2.5%. In your case, the original building was constructed in 1945. As this is before 26 February 1992, you are not entitled to a deduction for its construction cost. However, for construction work undertaken on the building after 26 February 1992, you are entitled to a deduction for capital works from the time it became available for rent.

Relevant facts: You purchased a property in October 200X in which you lived until you rented it out in January 200Y. | The original building was constructed in the mid 1940's as a single building. However, in 199Z the property was subdivided into a number of separate apartments. | A significant amount of construction work was done and structural improvements made. | You intend obtaining a quantity surveyor report to quantify the construction expenditure and depreciable items.