Finance and tax

Section 40-880 business capital expenditure

A five-year deduction for qualifying business-related capital expenditure that is not otherwise recognised for income tax purposes.

Reviewed 30 July 2026Income years 2025-26 and 2026-27

Who can claim

This deduction is available to individuals and companies.

  • The expenditure is capital in nature and relates to a current, former or proposed business in the way required by section 40-880.
  • The expenditure is not deductible and is not included in the cost of an asset or otherwise recognised under another tax provision.

What you cannot claim

  • Do not use section 40-880 for an asset cost, CGT cost-base amount or expenditure specifically denied by another provision.
  • Private, domestic and exempt-income expenditure is excluded.

How the amount is worked out

Where section 40-880 applies, deduct 20% of the qualifying amount in the income year and each of the next four income years, subject to any immediate-deduction exception.

Records the ATO expects

  • Detailed invoices
  • Business relationship analysis
  • Five-year deduction schedule
  • Entity and ownership records

Where this rule comes from

Primary source: Income Tax Assessment Act 1997 section 40-880 (Section 40-880). Reviewed 30 July 2026. Covers the 2025-26 and 2026-27 income years.

Supporting sources:

Next steps