Who can claim
This deduction is available to individuals and companies.
- The expenditure is qualifying construction expenditure for capital works and the completed area is used to earn rental income.
- The construction commencement date and the way the completed works are used support the applicable statutory rate.
What you cannot claim
- Do not claim capital works as an immediate repair.
- No capital-works deduction is available before construction is complete and the area is used in the relevant income-producing way.
- Private or non-rental periods must be excluded or apportioned.
How the amount is worked out
The rate is generally 2.5% for 40 years or 4% for 25 years, depending on when construction began and how the completed works are used. Start only after completion, calculate for the days the area is used to produce income and apportion private or non-rental use. Reduce the CGT cost base or reduced cost base for capital-works deductions claimed or able to be claimed.
Records the ATO expects
- Construction invoices
- Construction commencement and completion dates
- Quantity-surveyor or capital-works schedule
- Rental availability records
- Prior-owner deductions where known
Before you rely on this rule
Construction dates, asset type and any prior claims materially affect the result. Use the ATO rental-property guide before adding an amount.
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.
Supporting sources:
- ATO Rental properties guide 2026 (Rental properties guide 2026)
- Income Tax Assessment Act 1997 Parts 3-1 and 3-3 (Compilation 266 in force 1 July 2026)