What is tax depreciation?
Depreciation lets investment property owners deduct the wear-and-tear on the building (Division 43, 2.5%/yr over 40 years on construction cost) and on removable plant and equipment (Division 40, varying lives) against rental income.
Australian tax law lets investors claim depreciation on investment properties through two ATO divisions. Division 43 ('capital works') allows 2.5% per year over 40 years on the original construction cost of the building shell, applies to properties built after 1987.
Division 40 ('plant and equipment') covers removable assets, appliances, carpets, blinds, hot water systems, air conditioners, each with their own effective life under ATO tables. The 2017 Federal Budget restricted Div 40 to brand-new assets only for residential properties: second-hand purchases can no longer claim Div 40 on existing plant.
A quantity surveyor's depreciation schedule (one-off cost $400-$800) typically identifies $5,000-$15,000/year of deductions in the first 5 years of ownership for a modern investment property. That's worth $2,000-$7,000/year in tax saved at a 47% marginal rate, easily paying for the schedule many times over.
Also called
property depreciation · Div 43 · Div 40 · tax depreciation schedule
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General information only, not personal financial advice. Verified against https://ratesniffers.com.au/glossary on 2026-06-01.