Balancing deduction on destruction

If a building is destroyed in the circumstances described in section 43-40 of the ITAA 1997 during an income year, you can claim a deduction for the remaining amount of undeducted construction expenditure that has not yet been deducted, less any compensation received. This applies even if the destruction or demolition is voluntary.

You can claim the deduction in the income year in which the destruction occurs.

The deduction is reduced if the capital works are used in an income year only partly for the purpose of producing assessable income.

The method statement for calculating the amount of the balancing deduction is included at section 43-250 of the ITAA 1997.

For more information, see TR 97/25 and 97/25A Addendum Income tax: property development: deduction for capital expenditure on construction of income producing capital works, including buildings and structural improvements.

Last modified: 15 Jul 2016QC 48112