A property depreciation schedule is a report prepared by a quantity surveyor that details the deductions an investment property owner can claim each year for the decline in value of the building structure and its fixtures and fittings. Depreciation is a non-cash deduction — you do not spend money to claim it — which makes it one of the most powerful (and most overlooked) tax strategies available to Australian property investors.
What types of depreciation can I claim?
There are two types of depreciation deductions available to investment property owners:
| Type | What it covers | Rate |
|---|---|---|
| Division 43 (building allowance) | The building structure itself (walls, roof, floors, concrete) | 2.5% per year for 40 years (for buildings constructed after 15 Sept 1987) |
| Division 40 (plant and equipment) | Removable fixtures and fittings (carpet, blinds, appliances, hot water system, air conditioning) | Varies by asset (typically 5% to 33.3% diminishing value) |
How much can I claim in depreciation?
The amount varies significantly by property type, age and quality. As a guide:
- A new 2-bedroom apartment may generate $8,000 to $15,000+ in depreciation deductions in year one
- A new house with high-quality fixtures may generate $10,000 to $20,000+ in year one
- A 20-year-old house with limited renovations may generate $2,000 to $5,000 per year
- A property built before 1985 with no improvements may have little or no building allowance
Your quantity surveyor will calculate the exact figures based on a site inspection and building analysis.
Who prepares a depreciation schedule?
Depreciation schedules must be prepared by a registered quantity surveyor, not your accountant. The ATO requires that claims be substantiated by a specialist report. The cost of the report (typically $400 to $800) is itself tax deductible in the year you pay for it. A quality depreciation schedule is a once-only cost that continues delivering deductions for up to 40 years.
Can I claim depreciation on a second-hand property?
Yes, for Division 43 (building allowance) if the property was constructed after 15 September 1987. However, since the 2017 budget changes, investors who purchase a second-hand residential property can no longer claim Division 40 (plant and equipment) depreciation on pre-existing fixtures — only on new assets they install themselves. This change does not affect new properties, commercial properties, or brand-new residential purchases.
Frequently Asked Questions
When should I order a depreciation schedule?
Ideally immediately after settlement, so your accountant can include the deductions in your first tax return as a landlord. You can order one at any time for existing properties — the quantity surveyor will back-date the schedule to your purchase date or the date the property became available for rent.
Do I need a depreciation schedule for a granny flat or renovation?
Yes. Any new structure or significant renovation adds depreciable value. A quantity surveyor can incorporate new construction into your existing schedule or prepare a supplementary report.
Is depreciation only for new properties?
No. Any investment property constructed after 15 September 1987 — new or second-hand — is eligible for Division 43 building allowance. New properties and those with recent renovations also generate Division 40 claims. Only very old, unimproved properties may have minimal depreciation benefits.
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