What’s the difference between capital allowance and capital works?
Basically, capital allowances are the depreciation deductions you can claim for certain, qualifying assets within a property. This includes capital works deductions or building allowance, which refers specifically to the structural elements of a building.
In rental property, these deductions are claimed at the rate of 2.5% per annum based upon the original construction cost of the property. Though in some cases, you can claim up to 4% per annum building allowance.
For a deeper understanding, explore the depreciation rates different property types attract.
What building elements form the Capital Works deduction?
The type of work includes things like brickwork, concrete, kitchen cabinets, roofing, etc. It refers to the structure of the building. Generally this element of the building makes up 80-90% of the total construction cost.
If you own an apartment, you you can also claim your portion of the common capital works. This could include lobby areas, pools, landscaping or any other amenities. Remember, generally the taller a building is, the higher the construction cost.
Where to Start?
Here are some articles we would recommend reading first to get a great overview of the topic:
