- Depreciation lets you deduct the decline in value of a building and its fixtures
- Two categories: capital works (the structure) and plant & equipment (fixtures)
- Since 2017, plant & equipment is generally only claimable on new properties
- A quantity surveyor’s schedule is the document that unlocks the claim
Of all the tax deductions available to property investors, depreciation is the one most often left on the table. It’s a non-cash deduction — you don’t spend a dollar to claim it — yet it can improve after-tax cash flow by thousands of dollars a year. The catch is that you have to know it exists and get the paperwork right.
What depreciation actually is
Buildings and the things inside them wear out over time. The tax system recognises this by letting investors deduct that decline in value against their income each year. Because the property keeps earning rent while you claim the deduction, it effectively shelters some of that income from tax — without any cash leaving your pocket.
The two categories
Depreciation falls into two buckets. Capital works (Division 43) covers the building’s structure — walls, roof, floors — typically deductible at 2.5% a year over 40 years. Plant & equipment (Division 40) covers removable fixtures like carpets, blinds, air-conditioning and appliances, each with its own effective life.
The new-vs-second-hand rule
A 2017 change matters here: for second-hand residential properties, investors generally can no longer claim plant & equipment depreciation on assets that were already in the property when they bought it. Capital works deductions usually remain available, and new properties retain access to both categories — one reason new and near-new stock can be more tax-effective.
“Depreciation is the deduction you don’t have to spend money to earn. Ignoring it is leaving genuine cash flow on the table.
— Meridian Research
How to claim it
The document that unlocks it is a tax depreciation schedule, prepared by a qualified quantity surveyor. It lists every claimable item and its deduction over time, and your accountant uses it at tax time. The schedule is itself tax-deductible, and typically pays for itself many times over in the first year.
The Meridian view
Depreciation won’t make a bad property good, but on a well-chosen asset it can meaningfully lower the real cost of holding — which is why it belongs in every investor’s numbers from day one. This is general information only, not tax advice; a registered quantity surveyor and your accountant should confirm what applies to your property.
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