Who can claim
This deduction is available to individuals and companies.
- You own, lease or hold an eligible construction-expenditure area used to produce assessable business income.
- The building, extension, alteration or structural improvement is complete and the applicable construction-period and use tests are met.
What you cannot claim
- Land, demolition, clearing, site preparation and ordinary landscaping are not construction expenditure for this deduction.
- Plant and depreciating assets use the decline-in-value rules.
- No deduction arises before construction is complete or for private and non-taxable use.
- Repairs that are immediately deductible must not be duplicated as capital works.
How the amount is worked out
Apply the statutory 2.5% or 4% rate for the qualifying construction type and date, calculated for the days the area is used to produce assessable income and reduced for non-taxable use.
Records the ATO expects
- Construction contracts and invoices
- Completion and first-use dates
- Capital-works schedule or quantity-surveyor report
- Ownership, lease and use records
Before you rely on this rule
Construction dates, qualifying expenditure, ownership and use determine the Division 43 rate and start date.
Where this rule comes from
Primary source: ATO TR 97/25 capital works (TR 97/25). Reviewed 30 July 2026. Covers the 2025-26 and 2026-27 income years.