I have demolished an asbestos impacted garage shed to build granny flat in that place. Can i claim cost of demolition as per TR2020/2 or any other active ATO circular? If not fully deductable, can i claim as capital expenditure with 2.5% depreciation?
You would need to get a private ruling for a binding answer on deductibility. See this private ruling for a similar question
1052203132843 | Legal database
Demolition of the garage is not a construction cost of the granny flat. So not claimed as capital works. From ruling (paragraph 8)
"capital expenditure on land (on which the capital works are to be constructed), including clearing, demolition and landscaping costs, is not part of construction expenditure."
If the garage is depreciating under capital works then there would be a balancing adjustment.
Disposing or ceasing to use a depreciating asset | Australian Taxation Office
The cost of demolition would be a cost base cost (element 4)
You would need to get a private ruling for a binding answer on deductibility. See this private ruling for a similar question
1052203132843 | Legal database
Demolition of the garage is not a construction cost of the granny flat. So not claimed as capital works. From ruling (paragraph 8)
"capital expenditure on land (on which the capital works are to be constructed), including clearing, demolition and landscaping costs, is not part of construction expenditure."
If the garage is depreciating under capital works then there would be a balancing adjustment.
Disposing or ceasing to use a depreciating asset | Australian Taxation Office
The cost of demolition would be a cost base cost (element 4)
Cost base of assets | Australian Taxation Office
15 Apr 2026 · 4 min read time
15 Apr 2026 · 8 min read time
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