Glossary · Australian property
Division 43 (capital works).
ITAA 1997 division covering depreciation of structural elements of an investment property such as walls, roof, floors, kitchen carcase, and bathroom tiling.
Division 43 (ITAA 1997) applies to capital works: the building itself, including structural extensions and renovations. Annual deduction = 2.5% of construction cost, claimed straight-line over 40 years (so a $300K build cost yields $7,500/year for 40 years).
Unlike Division 40, Division 43 deductions are NOT restricted by the May 2017 budget changes. Second-hand property buyers can still claim Div 43 on building cost incurred after September 1987 (post-residential) or July 1985 (commercial / hotel).
Division 43 amounts claimed reduce your CGT cost base on a recapture basis at sale. What you saved in income tax during ownership effectively gets taxed back as capital gain at sale (offset by the 50% CGT discount). Net effect: half the recapture, so still favourable in the tax-deferral sense.
Source
ITAA 1997 Div 43; ATO TR 97/25 + supporting rulings.
Related terms
Open the playbook — 11 chapters end-to-end, every threshold cited.