Investment Property Disposal - Division 40 & Division 43 Interaction

(illustrative example – all figures in AUD)

Section	Item	Explanation / Reference	Amount (A$)
A. Purchase details
	Total purchase price	Land + Building + Fixtures	600,000
	Allocation – Plant & Equipment (Div 40)	QS or contract apportionment	220,000
	Allocation – Building (eligible Div 43)	Structural component	80,000
	Allocation – Land (non-depreciable)	Balancing item	300,000
	Total	220 + 80 + 300 = 600	600,000
B. Deductions claimed during ownership
	Div 40 depreciation claimed (plant)	Per QS schedule	(215,000)
	Div 43 capital-works claimed (building)	2.5 % × 10 yrs × $80	(20,000)
	Total deductions claimed		(235,000)
C. Written-down values before sale
	Div 40 adjustable value (closing)	220 – 215 =	5,000
	Div 43 building (book value)	N/A – affects cost base via CGT	—
D. Sale details
	Contract price (total)		900,000
	Portion attributable to Div 40 assets	QS apportionment	(20,000)
	Proceeds for CGT property portion	900 – 20 =	880,000
E. Division 40 balancing adjustment
	Proceeds for plant & equipment		20,000
	Less – adjustable value (WDV)		(5,000)
	Balancing adjustment income (ordinary)	s40-285 ITAA 1997	15,000
F. Division 43 cost-base adjustment
	Original cost base (CGT portion only)	Land + Building (600 – 220 Div 40)	380,000
	Less – Div 43 deductions claimed	s110-45(2) ITAA 1997	(20,000)
	Adjusted cost base	380 – 20 =	360,000
G. Capital Gain computation
	Sale proceeds (CGT portion)	880,000
	Less – Adjusted cost base	(360,000)
	Gross capital gain		520,000
	Less 50% CGT discount (held > 12m)		(260,000)
	Net capital gain (taxable)	Label 18 in return	260,000
H. Summary of tax impacts
	Div 40 balancing adjustment income	Ordinary income	+15,000
	Net capital gain (after discount)	Capital gain in return	+260,000
	Total assessable impact (Year of sale)	15 + 260 =	275,000