The Great Division: Division 40 vs Division 43

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In order to maximise property depreciation deductions, it is important to understand the difference between division 40 and division 43 regulations.
These two main pieces of legislation affect rates at which assets can be written off and claimed. Knowledge of the difference between division 40 and division 43 assets can assist in ensuring that deductions are maximised. This is particularly important when planning to replace any existing structures or items contained within an investment property.

Division 43

In order to maximise property depreciation deductions, it is important to understand the difference between division 40 and division 43 regulations.
These two main pieces of legislation affect rates at which assets can be written off and claimed. Knowledge of the difference between division 40 and division 43 assets can assist in ensuring that deductions are maximised. This is particularly important when planning to replace any existing structures or items contained within an investment property.

Division 40

Also known as ‘plant and equipment’, these are the removable assets found within an investment property. Examples of division 40 items which owners can claim depreciation deductions for include lights, blinds and ceiling fans.
These assets depreciate according to an individual effective life and therefore depreciate at a much faster rate than structural items. For example, in residential properties carpet can be claimed at a rate of 20 per cent over 10 years (using the diminishing value method).
Owners of all investment properties, regardless of the property’s age, are eligible to claim deductions for these assets.

Common mistakes investors can make by incorrectly categorising items

It is easy for investors to incorrectly allocate deductions for items by not seeking expert advice. Particular assets can cause great confusion as some assets will qualify in part for division 40 deductions and partly for division 43 deductions. For example an air conditioning unit falls under division 40 whilst the ducting for the same unit falls under the division 43 allowance. Similarly, an in-ground pool falls under the division 43 allowance whilst the pumps for the pool fall under division 40.
In order to ensure your deductions are maximised within the ATO guidelines, it is essential to have a specialist Quantity Surveyor visit the property and complete a site inspection which lists all assets and outlines the deductions correctly.
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