Cgt Cost Base · Koste Knowledge Base

Can second-hand Division 40 assets create a capital loss?

Published 26 June 2026 · Last updated 26 June 2026

Quick Answer

In some cases, second-hand residential Division 40 assets that cannot be depreciated annually may be relevant for capital loss treatment when a CGT event occurs. This is why asset values should be recorded even if annual deductions are denied.

This is an advanced but valuable topic.

After the 2017 residential depreciation changes, many investors cannot claim annual depreciation on previously used Division 40 assets.

However, the rules may allow certain denied asset values to be recognised later for capital loss purposes when a relevant CGT event occurs.

This may apply to assets such as:

Carpet
Blinds
Appliances
Furniture
Air conditioning
Hot water systems

The key is that the assets need to be identified and valued. If they are ignored, the accountant may not have the information needed later.

Important: This does not mean every investor automatically receives a capital loss. The final treatment depends on tax law, property circumstances and accountant advice.

Frequently Asked Questions

Is capital loss the same as depreciation?

No. Depreciation is claimed during ownership. Capital loss may be considered later when a CGT event occurs.

Do I automatically get a capital loss?

No. Your accountant needs to review the rules and your circumstances.

Why do I need a QS report?

The report can identify and value assets that may otherwise be missed.

Does this apply to new assets?

New assets purchased by the investor may be depreciated differently.

Can Koste.ai identify these assets?

Yes. Koste.ai can support the asset identification and report workflow.

Read Full Article Free Calculator

capital lossDivision 40second-hand assetsCGT

Written by Koste Team · Koste Chartered Quantity Surveyors · AIQS Member · RICS Member · TPB Registered · 1300 669 400 · info@koste.ai