What depreciation can I claim on an investment property in Australia?

Investment property depreciation falls into two categories: capital works (Division 43) and plant and equipment (Division 40). Division 43 covers the structural components of the building at 2.5% per year for 40 years from when construction was completed. This applies to all residential investment properties built after 17 July 1985 regardless of when you purchased them.

Division 40 covers removable items such as carpets, blinds, dishwashers, ovens, air conditioning systems, and hot water systems. Each item has its own effective life and depreciation rate. However, investors who bought an established property after 7:30pm on 9 May 2017 can only claim Division 40 depreciation on assets they purchased new. They cannot claim the decline in value of second-hand plant and equipment already in the property at settlement.

A quantity surveyor prepares a tax depreciation schedule that identifies and values all claimable items. Fees for the schedule are typically $300 to $700 and are themselves deductible. For a relatively new property, depreciation deductions can be substantial, often $5,000 to $20,000 per year in the early years. For older properties, the building may still have remaining Division 43 life, but plant and equipment items may be fully depreciated.