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Edited version of your private ruling
Authorisation Number: 1012532718697
Ruling
Subject: Capital works
Question
Are you entitled to a deduction for capital works?
Answer
Yes.
This ruling applies for the following period
Year ended 30 June 2011
Year ended 30 June 2012
Year ended 30 June 2013
The scheme commenced on
31 January 2011
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.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 43
Income Tax Assessment Act 1997 Subsection 43-25(1)
Reasons for decision
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.