If you own an investment property and don't have a tax depreciation schedule, you're almost certainly leaving thousands of dollars on the table every year. Tax depreciation is one of the most powerful — and most underutilised — tools available to Australian property investors.
What Is Tax Depreciation?
Tax depreciation allows property investors to claim deductions for the natural wear and tear of their investment property and its fixtures over time. The Australian Tax Office (ATO) recognises that buildings and their contents lose value as they age, and allows investors to claim this loss as a tax deduction.
There are two main categories of depreciation:
Division 43: Capital Works
The building structure itself — walls, roof, floors, doors, windows. Claimable at 2.5% per year for properties built after September 1987.
Division 40: Plant & Equipment
Removable fixtures and fittings — carpets, blinds, hot water systems, air conditioning, appliances, smoke alarms, and more.
How Much Can You Save?
The savings can be substantial. Here are some typical examples for Hills District properties:
| Property Type | Age | Annual Deduction | Tax Saving* |
|---|---|---|---|
| New apartment (Norwest) | 1–5 years | $12,000–$18,000 | $4,440–$6,660 |
| Modern house (Kellyville) | 5–10 years | $8,000–$14,000 | $2,960–$5,180 |
| Established home (Castle Hill) | 15–25 years | $4,000–$8,000 | $1,480–$2,960 |
| Renovated property | Any age | $6,000–$15,000 | $2,220–$5,550 |
*Based on 37% marginal tax rate. Individual results vary.
Key insight: Even older properties can yield significant deductions, especially if renovations have been completed. Many landlords assume their property is "too old" for depreciation — this is rarely the case.
Common Items You Can Claim
You might be surprised at how many items in your investment property are depreciable. Common claimable items include:
How to Get a Depreciation Schedule
A tax depreciation schedule must be prepared by a qualified quantity surveyor. The process is straightforward:
- Engage a quantity surveyor: Choose an ATO-compliant firm that specialises in residential property. The cost is typically $600–$800 and is itself tax deductible.
- Property inspection: The surveyor will inspect your property (or use construction data for newer builds) to identify all depreciable items.
- Receive your schedule: You'll receive a detailed report covering 40 years of deductions, which your accountant uses at tax time.
- Claim annually: Your accountant applies the relevant deductions each financial year. No further action required from you.
Important Changes to Know
Since the 2017 budget changes, there are some important rules to be aware of:
- For properties purchased after 9 May 2017, you can only claim Division 40 (plant and equipment) deductions on new items that you or your agent purchased
- Division 43 (capital works/building structure) deductions are not affected by this change — you can still claim these on any property built after 1987
- If you purchased your property before 9 May 2017, the old rules still apply and you can claim all depreciation
- Any renovations or improvements you make are fully claimable regardless of when you purchased
The Bottom Line
A tax depreciation schedule is one of the best investments you can make as a property owner. For a one-off cost of $600–$800, you could save thousands of dollars every year for decades. If you don't have one, talk to your accountant or ask us for a referral to a trusted quantity surveyor.
Need a Depreciation Schedule Referral?
We work with trusted quantity surveyors who specialise in Hills District properties. Get in touch and we'll connect you.
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