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Appendix 1: Capital works deductions

Last updated 28 July 2020

Division 43 of the ITAA 1997 provides for a system of deducting capital expenditure incurred in the construction of capital works used to produce assessable income.

Capital works

You can deduct construction costs in respect of the following capital works:

  • buildings or extensions, alterations or improvements to a building
  • structural improvements or extensions, alterations or improvements to structural improvements
  • environmental protection earthworks.

Deductions for construction costs must be based on actual costs incurred. If it is not possible to genuinely determine the actual costs, provide an estimate by a quantity surveyor or other independent qualified person. The costs incurred by the fund for providing this estimate are deductible as a tax-related expense, not as an expense in gaining or producing assessable income.