Question

An office building for use in the business. It was purchased on 15 June CY at a cost of $770,000. Construction had commenced on 1 March 1987 at a cost of $300,000.

Calculate the Division 43 deductions which are available to the taxpayer.

CY is current year

Answer 1

solution : $491.80(Approx)

explanation : we assume financial year is started from 1 july 2019 to 30 june 2020

The table below sets out a summary of the deductions available under Division 43 for capital expenditure on specific types of construction. The rate is determined by the date construction commenced s.43-80 while the deduction can be claimed from the time the building is first used to earn assessable income.

Eligible industrial buildings are factories or buildings used to manufacture goods.

Construction commenced: After but Before	19.7.82 22.8.84	21.8.84 18.7.85	17.7.85 16.9.87	15.9.87 28.2.92	27.2.92 current
Non-residential income producing (e.g. shops, offices, warehouses)	2.5	4.0	4.0	2.5	2.5
Residential income producing (e.g. houses, flats, apartments)	N/A	N/A	4.0	2.5	2.5
Eligible industrial buildings (factories)	2.5	4.0	4.0	2.5	4.0

NOTE : deduction is always based on cost of construction not on cost of buying

so as per above table offcie building is availabe for deduction under DIVISION 43 @ 4% because its commencement start after the 17.7.85 but before the 16.9.87 .

so annual capital work deduction for 2020

=$300,000 x 4%

=$12,000

this is for whole year but office is used only for 15 days in this year

so $12,000 x 15/366

=$491.80

so deduction available for tax payer is $491.80

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