What are capital works deductions?

Understanding tax depreciation lingo can sometimes be confusing but as an investor, it’s important that you have a good understanding of the depreciation deductions you can claim to ensure you’re getting the most out of your investment property.

As outlined by the Australian Taxation Office there are two categories that make up depreciation deductions – division 43 capital works deductions and division 40 plant and equipment depreciation. 

Capital works deductions are income tax deductions an investor can claim for the wear and tear that occurs to the structure of the property and items considered to be permanently fixed to the property. This includes any structural improvements that may have been made during a renovation within the relevant dates.

In a residential property, capital works deductions cover the following items:

  • Bricks, mortar, walls, flooring and wiring
  • Built-in kitchen cupboards
  • Clotheslines
  • Doors and door furniture (handles, locks etc.)
  • Driveways
  • Fences and retaining walls
  • Sinks, basins, baths and toilet bowls

Some common items in commercial properties that can be claimed as capital works deductions include:

  • Bricks, mortar, walls, flooring, roofing and wiring
  • Sinks, tiles, basins and toilet bowls
  • Mezzanines
  • Ducting for air conditioning

Generally, any residential building where construction commenced after 15 September 1987 will allow the owner to capital works deductions at a rate of 2.5 per cent per year for up to forty years. 

If your property was constructed prior to these dates, it’s still important to get in touch with a qualified quantity surveyor such as BMT Tax Depreciation as often these buildings will have undergone some form of renovation which can result in capital works deductions for the owner.


Use our Depreciation Calculator to estimate the likely depreciation deductions claimable for all types of property including residential, commercial and manufacturing buildings.

Estimate the likely depreciation deductions for your investment property.

For more information we recommend BMT Tax Depreciation is Australia’s leading supplier of residential and commercial tax depreciation schedules.

Request a Quote Online or call BMT on 1300 728 726.