CapEx vs OpEx is one of the first finance policies Australian teams set because it drives cash flow, tax timing, GST treatment, and budgeting discipline. Get it wrong and you risk misstated BAS lines (G10 vs G11), missed deductions, or internal spend chaos.

This guide gives you the Australian context: how the ATO draws the line between capital and operating expenditure, what that means for depreciation vs immediate deduction, how GST credits and BAS reporting work, and how to bake the rules into your approval workflow so the policy is actually followed.

What you’ll learn: ATO definitions, tax rules (Division 40 and Division 43), current instant asset write-off threshold for small business, GST/BAS reporting (G10 vs G11), and how to operationalise the policy with Approveit approvals and audit trails.

CapEx vs OpEx: Quick Definitions

CapEx (capital expenditure)

CapEx are costs that create, acquire, or substantially improve a long-life asset used to earn income. For tax, they’re generally not immediately deductible; instead you claim deductions over time under capital allowance rules (most tangible assets under Division 40) or capital works for buildings and structural improvements (Division 43).

Common CapEx examples: servers and on-prem hardware, forklifts and plant, leasehold fit-outs, major building works, new roofs, structural extensions, or a fleet vehicle above the instant asset write-off threshold.

OpEx (operating expenditure)

OpEx are your day-to-day running costs that are generally deductible in the year incurred—think rent, utilities, staff training, advertising, insurance, routine repairs and maintenance, subscriptions, and professional services.

Repairs vs improvements (why the distinction matters)

• Repairs/maintenance restore something to its original condition (fix wear and tear); they’re usually immediately deductible.

• Improvements go beyond repair - enhancing capacity, efficiency, or life—so they’re capital and claimed over time (often as capital works).

CapEx vs OpEx — small comparison table

💡 Notes: A repair remains OpEx; an improvement is CapEx even if the cash outlay is small. GST credits depend on registration, business use, and having a valid tax invoice; BAS uses G10 for capital and G11 for non-capital when you use the full worksheet.

How the ATO Treats CapEx for Tax

Depreciating assets (Division 40)

Most tangible business assets (and certain intangibles) are depreciating assets. You deduct their decline in value over their effective life using either:

• Diminishing value method (higher deductions earlier), or

• Prime cost method (straight-line).

The ATO publishes effective life determinations and the 2025 Depreciating Assets Guide explains how to choose a method, work out start dates, balancing adjustments on disposal, and private-use apportionment.

Pooling (small business): Eligible small businesses using simpler depreciation can pool assets above the instant write-off threshold and claim 15% in the first year and 30% thereafter on the pool.

Capital works (Division 43)

Structural and building works (e.g., building, extensions, structural alterations, certain fit-outs) are not depreciated like plant; you generally claim a fixed rate deduction—commonly 2.5% per year (sometimes 4%, depending on date/type). These apply over long periods (e.g., 40 or 25 years).

Instant asset write-off (small business)

For the 2024–25 and 2025–26 income years, eligible small businesses (subject to turnover and other criteria) can immediately deduct assets costing less than $20,000 per asset. Assets ≥ $20,000 go to the small business pool (15% first year, 30% subsequent years). Check eligibility rules, timing (first used or installed ready for use), and exclusions.

Effective life basics & pooling pointers

• Effective life: Use the Commissioner’s determinations or self-assess in limited cases; ensure you apply the method consistently.

• Balancing adjustments: On sale/scrap, you may have assessable or deductible amounts.

• Simpler depreciation: If you opt in and meet criteria, apply 15%/30% pool rates and consider write-off when pool balance falls below the threshold at year-end.

What Counts as OpEx

Typical OpEx you can usually deduct when incurred

• Salaries & wages, super administration costs, rent/leases, utilities, insurance, advertising, bank fees, freelancer/consultant fees, routine repairs & maintenance, and subscriptions. The ATO’s operating expenses guidance confirms these are generally deductible in the same income year you incur them (subject to general deduction rules, business use, and documentation).

Software & digital

• SaaS subscriptions: Commonly treated as operating expenses and deductible when incurred (they’re a service, not a depreciating asset), assuming they’re used to earn assessable income and the general deduction tests are met. Public sector accounting guidance similarly treats SaaS service elements as period expenses (configuration/customisation may vary).

• In-house software: If you develop software that your business controls, it is typically a depreciating intangible with a statutory effective life of 5 years for assets first used/installed on or after 1 July 2015 (4 years for earlier periods). You claim deductions under the uniform capital allowances rules or simplified depreciation if eligible. (Accounting capitalisation under AASB 138 may differ from tax.)

Repairs vs improvements refresh: keep classifying routine maintenance as OpEx; upgrades that enhance the asset are CapEx (Div 40 or Div 43 as applicable). Document the purpose and outcome of the spend; it’s a frequent audit focus.

GST & BAS Implications

GST credits (input tax credits)

If you’re registered for GST and the acquisition is for business use, you can generally claim GST credits for both CapEx and OpEx—provided you hold a valid tax invoice for purchases over $82.50 (inc GST). Time limits and special rules apply.

Practical checklist:

• Ensure the supplier is GST-registered and the invoice is a valid tax invoice (name/ABN, date, description, GST amount or “GST included”).

• Apportion credits for mixed-use purchases (business vs private).

• Keep records—five years is the common retention period expectation.

BAS reporting: G10 vs G11 (full reporting method)

When lodging your BAS using the full worksheet, purchases are split between:

• G10 — Capital purchases (e.g., equipment, vehicles, major assets, capital works), and

• G11 — Non-capital purchases (day-to-day operating expenses, trading stock, services).

This split feeds through to G12 (subtotal) and the GST calculation. Misclassifying CapEx as G11 (or vice versa) is a common source of BAS errors.

Adjustment reminders (Division 129)

For large capital acquisitions or items whose actual use changes over time, you may have GST adjustment periods (in later tax periods) to true-up your original credit claim to actual business use. The number of adjustment periods depends on the GST-exclusive value of the acquisition. Ensure you monitor use-percentage changes and keep source records for adjustments.

Turning policy into practice with Approveit (CapEx/OpEx operationalisation)

Policy is only as strong as the workflow. To make your CapEx/OpEx split stick in the real world, embed the rules into your purchasing and invoice approvals:

1. Route by spend type and amount.
   Build two top-level paths: CapEx (assets/capital works) and OpEx (operating expenses). For CapEx, add extra controls: asset owner, cost centre, expected effective life, Div 40 vs Div 43 tag, and proposed GST/BAS category (G10). You can create multi-step approvals (requestor → manager → finance → CFO/board) before POs are issued. Approval software with multi-step workflows helps you enforce this consistently.

2. Budget guards & cost centres.
   Map requests to cost centres and annual/quarterly CapEx budgets. Block or escalate if a request blows the budget or if the pool/write-off strategy (e.g., using the $20k instant write-off) requires finance review. Approveit’s Procurement Automation page shows how to link POs to budgets and notify on overspend in real time: Procurement automation.

3. Data capture for tax & BAS.
   Add required fields to requests: GST treatment, G-code suggestion (G10/G11), asset vs expense, supplier ABN, and business-use %. Finance can override before posting. Route invoices and POs to the right ledger and tax codes via prebuilt integrations (Slack, Teams, Xero, NetSuite, etc.). See Approveit’s Integrations hub: Integrations hub.

4. Do approvals where your team works.
   Keep adoption high by letting managers approve CapEx/OpEx requests in Slack or Teams with the full context (budget left, GST, method, attachments). Approveit’s guide shows exactly how this looks: Create & approve requests in Slack.

5. Audit trail + evidence.
   Store the valid tax invoice, supplier ABN, funding approval, and classification notes with the request. That gives you a clean trail if the ATO queries a G10/G11 classification or a Division 129 adjustment later.

6. Post-approval automation.
   On approval, auto-create the PO (CapEx path) or post the expense (OpEx path) to your accounting system with the right tax codes and asset group/pool. Use tags like Div40, Div43, Pool-15/30, G10Cap, G11Op so downstream reporting and year-end work are painless.

7. Review cadence.
   Each quarter, run a quick review of CapEx assets vs plan, pool balance, remaining instant write-off opportunities, and GST adjustment watchlist (assets where business use may change). Your workflow should allow bulk pulls of CapEx items added this period to verify treatment.

Practical examples

• Example 1 — New warehouse conveyor ($85,000 + GST).
  Classified as CapEx (plant under Div 40). Deduct decline in value over effective life (choose diminishing value or prime cost). Claim GST credit with valid tax invoice. BAS: report at G10. If small business and using simplified depreciation, this asset goes to the pool (15% first year, 30% thereafter).

• Example 2 — SaaS project management tool ($1,200/yr + GST).
  OpEx, generally deductible when incurred. Claim GST credits and report at G11. If there’s significant configuration/customisation that creates your own software component, consider capitalisation for that portion (facts-and-circumstances).

• Example 3 — Roof replacement vs leak repair.
  Replacing a few damaged tiles and flashing is repair/maintenance (deduct now). Replacing the entire roof to a better, longer-lasting material is likely an improvement (CapEx, often capital works at 2.5% p.a.). Keep photos, quotes, and scope in the approval request.

• Example 4 — In-house app built for logistics workflow.
  Treated as in-house software; claim deductions over 5 years (if first used or installed ready for use on/after 1 July 2015). If you’re an eligible small business and choose simplified depreciation, consider how software pools interact with your policy.

Policy tips (what to put in your CapEx/OpEx policy doc)

1. Definitions & thresholds.
   Define CapEx vs OpEx with clear examples and specify the approval threshold (e.g., any asset or improvement > $X needs CFO sign-off; all capital works require finance review).

2. ATO mapping.
   Include a one-pager mapping: Div 40 vs Div 43, instant asset write-off conditions, pooling rules, and effective life references. Link to the current ATO guide your team should consult at year-end.

3. GST/BAS section.
   Spell out G10 vs G11 with common categories and examples; checklist for valid tax invoices; notes on adjustment periods for high-value capital acquisitions.

4. Workflow rules.
   Encode the policy into your approvals: mandatory fields, default routing paths, and accounting codes per category. Require attachments (quotes/invoices), supplier ABN, and business-use % for GST.

5. Quarterly compliance review.
   Review CapEx queue, pool balance, assets approaching balancing adjustments, and any items tagged for GST adjustments if usage has shifted.

With a tool like Approveit, those rules run silently in the background: approvers get clean context; finance gets clean data; auditors get a clean trail; and your BAS entries (G10/G11) don’t need heroic clean-up at quarter-end.

FAQs

Is every “asset” CapEx?
No. Low-cost items might be immediately deductible under small business instant asset write-off rules if you’re eligible. Above the threshold, they’re typically capital and either depreciated (Div 40) or claimed as capital works (Div 43).

Can routine maintenance be capital?
Routine maintenance is usually deductible; but if you improve the asset beyond its original state (capacity or life), that’s CapEx. Document intent and outcome.

Where do I put CapEx vs OpEx on BAS?
Under the full reporting method, G10 = capital purchases; G11 = non-capital purchases. Your GST credits still depend on being registered, business use, and holding a valid tax invoice.

Do I need to worry about GST adjustments later?
Possibly. If actual business use of a capital item shifts over time, Division 129 can require adjustments in specific adjustment periods, based on the asset’s value. Track usage and keep records.