Division 43 is the section of the Income Tax Assessment Act that governs capital works deductions, the depreciation you can claim on the building structure of your rental property. It covers the permanent, structural elements of a building: the walls, roof, floors, foundations, built-in cupboards, plumbing within walls, and similar fixed components.
Where Division 40 handles the removable items inside a property, Division 43 handles the building itself. It is one of the most valuable deductions available to property investors because it applies to a large portion of the property's total value.
The 2.5% Rate
For residential properties where construction began after 15 September 1987, the Division 43 deduction rate is 2.5% of the original construction cost per year. This deduction runs for 40 years from the date construction was completed.
If the building cost $300,000 to construct, the annual Division 43 deduction is $7,500. Over 40 years, you can claim the entire construction cost. If you buy the property partway through that 40-year period, you can claim the remaining years of deductions.
What About Renovations?
Structural renovations and extensions also qualify for Division 43 deductions from the date they are completed. If you spend $50,000 on a structural renovation, you can claim $1,250 per year (2.5%) for 40 years. The renovation deduction runs separately from the original building deduction.
Why It Matters for Landlords
Division 43 deductions are often the single biggest depreciation claim available on a rental property, particularly for newer buildings where the full construction cost is known. Even for older properties, a quantity surveyor can estimate the original construction cost and calculate what remains to be claimed. Because these deductions are non-cash (you do not have to spend money to claim them), they directly reduce your tax bill without affecting your cash flow. For a full walkthrough, see our guide on how to calculate depreciation on your rental property.
propkt tracks Division 43 deductions alongside all your other property expenses. For a quick estimate of what you might be able to claim, try our depreciation calculator.