Two categories, different evidence
Division 40 addresses depreciating assets; Division 43 addresses eligible capital works. The distinction matters because classification affects the method, period and conditions for deductions. An item should not be counted under both categories.
What belongs in the construction record?
Keep building contracts, construction commencement and completion dates, renovation invoices and descriptions of structural improvements. Original construction expenditure is different from the property purchase price or its current market value. Applicable dates, use and rates must be checked for the relevant work.
What belongs in the asset record?
Keep purchase and installation dates, invoices, ownership details and a description of how each asset is used. Appliances and other equipment may need asset-specific assessment. Previously used assets in residential rental properties can face restrictions; inclusion in a schedule is not proof of entitlement.
What if the property is older?
Separate the original building from later work. Later renovations may have different dates and evidence. Do not assume a purchase restarts the deduction period, or that all improvements qualify simply because they are recent.
Using the schedule in a tax return
The report should make classifications, assumptions and relevant calculations understandable. Your accountant applies ownership shares, private use and the rules for the tax year. If construction costs are missing, ask whether a suitably qualified estimate is required.
Frequently asked questions
Is depreciation a decline in market value?
For this purpose, tax depreciation concerns specified costs and assets. A property can rise in market value while eligible costs receive deductions.
Does buying an established house make every asset deductible?
No. Previously used residential assets need particular attention under the ATO rules.
Sources and further reading
- ATO: Work out your capital works deductions — Eligible construction expenditure and applicable deduction rules.
- ATO: Second-hand depreciating assets — Restrictions relevant to previously used residential rental assets.
Arrange the right report
Explore tax depreciation with Propti. Send the property address, purpose, required date and recipient’s instructions when you request a property report quote.