Can I claim depreciation on an older property?

Yes, but the deductions will be lower. Division 43 (capital works) deductions are available for any building constructed after 15 September 1987. Division 40 (plant and equipment) deductions on second-hand items are no longer available for properties purchased after 9 May 2017, but you can still claim Division 40 on any new items you install yourself (e.g., a new air conditioner or carpet).

Do I need a new schedule if I renovate?

Yes. Renovations add new depreciable items and may increase the capital works deduction. Ask your quantity surveyor to prepare an updated or amended schedule that captures the additional value from the renovation.

What if I did not claim depreciation in previous years?

You can amend your previous tax returns to claim missed depreciation deductions for up to two prior financial years. Speak to your accountant — this often results in a significant tax refund. Getting a depreciation schedule now will cover both future and amendable past years.

Does depreciation affect capital gains tax when I sell?

Yes. Depreciation deductions claimed reduce the cost base of your property for capital gains tax (CGT) purposes. This means you may pay more CGT when you sell. However, the upfront tax savings from depreciation typically outweigh the additional CGT, especially when factoring in the time value of money and the 50% CGT discount for assets held over 12 months.

What is a Depreciation Schedule? | Realestate Lens

Definition

Depreciation Schedule

A depreciation schedule is a detailed report prepared by a qualified quantity surveyor that estimates the decline in value of a property's building structure and its fixtures and fittings over time. Property investors use it to claim tax deductions that reduce their taxable income — even though no actual money is spent.

Depreciation is one of the most significant tax deductions available to Australian property investors, yet many investors either overlook it or underestimate its value. A properly prepared depreciation schedule can deliver $5,000 to $15,000 or more in tax deductions per year for a typical residential investment property, particularly newer properties. Combined with negative gearing, depreciation can substantially reduce your annual out-of-pocket costs.

Division 40 vs Division 43 Depreciation

The Australian Tax Office (ATO) divides property depreciation into two categories under the Income Tax Assessment Act 1997:

The Two Types of Property Depreciation

Criteria	Division 40 (Plant & Equipment)	Division 43 (Capital Works)
What it covers	Removable or mechanical items — carpets, blinds, air conditioning, hot water systems, ovens, dishwashers	The building structure itself — walls, roof, foundations, fixed cabinetry, plumbing and electrical within walls
Depreciation method	Diminishing value or prime cost. Rate varies by asset (effective life set by ATO)	Flat rate: 2.5% per year (40-year life) for buildings constructed after 15 September 1987
Typical annual deduction	$2,000 - $8,000 in the early years (higher for newer properties, decreases over time)	$3,000 - $10,000+ per year depending on construction cost
2017 rule change impact	Investors who purchase second-hand properties after 9 May 2017 can no longer claim Division 40 deductions on existing plant and equipment	Unaffected — Division 43 deductions can still be claimed on any eligible property regardless of when it was purchased
New property buyers	Full Division 40 deductions available for brand-new properties and any items the investor installs themselves	Full Division 43 deductions available for buildings constructed after 15 September 1987

How to Get a Depreciation Schedule

1
Confirm eligibility
Only investment properties generate depreciation deductions. Owner-occupied homes cannot claim depreciation. The property must be income-producing (rented or genuinely available for rent).
2
Engage a qualified quantity surveyor
The ATO requires depreciation schedules to be prepared by a suitably qualified professional — in practice, a registered quantity surveyor. Your accountant cannot estimate the figures themselves.
3
Property inspection
The quantity surveyor inspects the property (in person or, for some firms, via detailed photos and plans) to assess the building's age, condition, construction costs, and all plant and equipment items.
4
Receive your schedule
The surveyor produces a detailed report covering the full depreciable life of the property (up to 40 years). Your accountant uses this to maximise your tax return deductions each year.

Cost and Return on Investment

A depreciation schedule for a standard residential investment property typically costs between $400 and $800 (including GST). This is a one-off cost, and the fee itself is tax-deductible. Most investors recoup the cost within the first year through reduced tax.

For example, if your depreciation schedule identifies $10,000 in deductions and your marginal tax rate is 37%, you save $3,700 in tax that year — many times the cost of the report. Over the life of the schedule, total deductions can reach $100,000 or more for newer properties. If you are new to property investment, our property investment for beginners guide explains how depreciation fits into the bigger picture.

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