Capital works deduction calculator (Division 43, rental property)
Work out your capital works deduction for a rental property or business building: 2.5% a year for 40 years or 4% for 25 years, depending on the type of construction and the date construction started. Enter the construction cost (not the purchase price), the construction dates and when the property was rented. You get this year's claim pro-rated by days, when the claim period ends, and how much is left to deduct. Figures match the ATO's worked examples.
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CalculatorRates and datesExamplesFAQ
Rates by type and construction start date (ATO)
| Type of construction | Started after | Rate |
|---|---|---|
| Residential building (or building to produce income) | 17 July 1985 | 18 July 1985 to 15 September 1987: 4%. From 16 September 1987: 2.5% (4% for certain earlier contracts) |
| Structural improvements | 26 February 1992 | 2.5% |
| Non-residential building (shop, office) | 19 July 1982 | 20 July 1982 to 21 August 1984: 2.5%. 22 August 1984 to 15 September 1987: 4%. From 16 September 1987: 2.5% |
| Short-term traveller accommodation | 21 August 1979 | 22 August 1979 to 21 August 1984: 2.5%. To 15 September 1987: 4%. To 26 February 1992: 2.5%. From 27 February 1992: 4% |
| Environment protection earthworks | 18 August 1992 | 2.5% |
2.5% means 40 years of deductions, and 4% means 25 years. You can only start claiming once construction is complete, and only for days the property is rented or available for rent. Total deductions can't exceed the construction cost, and they reduce your CGT cost base. Industrial buildings used for manufacturing have their own rules, which this doesn't cover.
Examples (ATO)
| Example | Deduction |
|---|---|
| Meg: townhouse built 2005 for $500,000 ($12,500 a year), rented from 1 March 2026: $12,500 × 122 ÷ 365 | $4,178 |
| Jin: carport finished 1 July 2025 for $3,500 total: $3,500 × 2.5% | $87.50 |
| Brett: $30,000 improvements finished 1 October 2020, sold 1 February 2021: $30,000 × 2.5% × 124 ÷ 365 | $255 |
| Brett: original house, construction started before 18 July 1985 | $0 |
FAQ
How do you calculate capital works deductions?
Multiply the construction cost by 2.5% (or 4% for some older or traveller-accommodation buildings), then by the days the property was rented or available for rent, divided by the days in the year. A $500,000 build gives $12,500 a year, or $4,178 for 122 days.
Is it 2.5% or 4% for my rental property?
For a residential building, 2.5% if construction started on or after 16 September 1987, and 4% if it started from 18 July 1985 to 15 September 1987. If construction started before 18 July 1985 there’s no deduction for the original building, but later improvements can qualify.
How many years can I claim capital works?
40 years at 2.5%, or 25 years at 4%, counted from when construction was completed, not from when you bought the property. A new owner can claim the years that are left.
Can I use the purchase price for capital works?
No. You need the construction cost from building records or a quantity surveyor’s estimate. The purchase price, insured value and replacement cost can’t be used, and an owner-builder’s own labour isn’t included.
Do capital works deductions affect capital gains tax?
Yes. Capital works deductions you’ve claimed (or could have claimed) reduce the cost base of the property, which increases the capital gain when you sell.
Sources (checked 17 Oct 2026): ATO Work out your capital works deductions; Capital expenses (rental properties); Capital works deductions (business); Sale of a rental property (Brett).
General information, not tax advice. The amount still to deduct is only an estimate, assuming every owner claimed from completion. It doesn't split costs between items or handle demolished works, manufacturing buildings, or plant and equipment (see the depreciation calculator). A quantity surveyor's report gives you the construction cost when you don't have records.