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Requirement for deductibility

Last updated 12 February 2019

A fund can deduct an amount for capital works in an income year if:

  • the capital works have a ‘construction expenditure area’
  • there is a ‘pool of construction expenditure’ for that area, and
  • the fund uses the area in the income year in a deductible way (which generally means to produce assessable income) set out in section 43-140 of the ITAA 1997.

No deduction until construction is complete

A fund cannot claim a deduction for any period before the completion of construction of the capital works even though the fund used them, or part of them, before completion. Additionally, the deduction cannot exceed the undeducted construction expenditure for your area.

Capital works are taken to have begun when the first step in the construction phase starts, for example, pouring foundations or sinking pylons for a building.