Tax Depreciation: How Much Can You Claim on Your Investment Property? (2026)
If you own an investment property in Australia and don't have a depreciation schedule, you're almost certainly leaving money on the table. A depreciation schedule allows you to claim tax deductions for the wear and tear on the building and its fittings - even if you didn't pay for them.
## How Depreciation Works
The ATO allows investment property owners to claim deductions for the decline in value of:
**Division 43 - Capital Works (the building itself)**
- The structural elements: walls, floors, roof, fixed cupboards, driveways
- Deducted at 2.5% per year for buildings constructed after September 1987
- Based on the original construction cost (not what you paid for the property)
- For a $400,000 construction cost, that's $10,000 per year for 40 years
**Division 40 - Plant & Equipment (removable items)**
- Carpet, blinds, curtains, hot water systems, cooktops, air conditioning, smoke alarms
- Each item has an "effective life" set by the ATO (e.g., carpet = 8 years, blinds = 10 years)
- Deducted using either the prime cost (straight-line) or diminishing value method
- Deductions are higher in early years and reduce over time
## The Second-Hand Rule (Post May 2017)
If you exchanged contracts after 9 May 2017 on a previously-owned property, you **cannot** claim Division 40 deductions on existing plant and equipment items that were already in the property. You can only claim:
- Division 43 (the building structure) - still fully claimable
- New Division 40 items that you purchase and install yourself
This rule doesn't apply if you're the original owner, or if you exchanged contracts before 9 May 2017.
## How Much Can You Claim?
**New property (first owner)**
Year 1 deductions: typically $15,000–$40,000
Total over schedule period: $100,000–$300,000+
**Established property (post-1987)**
Year 1 deductions: typically $5,000–$15,000
Total over schedule period: $50,000–$150,000
**Pre-1987 property**
Division 43 not available (building too old), but Division 40 items you install yourself are still claimable.
## What It Saves You in Tax
Your tax saving depends on your marginal tax rate:
- $10,000 deduction at 32.5% rate = **$3,250 back**
- $10,000 deduction at 37% rate = **$3,700 back**
- $10,000 deduction at 45% rate = **$4,500 back**
Over a 10-year holding period, depreciation can return $20,000–$80,000+ in tax savings.
## Do You Need a Quantity Surveyor?
Yes. Only a qualified quantity surveyor (registered tax agent) can prepare a depreciation schedule that the ATO will accept. The schedule typically costs $600–$800 and is itself tax-deductible. It's a one-time cost for the life of your ownership.
## Renovations and Scrapping
If you renovate, you can "scrap" the remaining value of items you remove (old carpet, old kitchen, old bathroom). This gives you a one-off deduction for the undepreciated value. Your quantity surveyor can update your schedule to include scrapping deductions and new items.
## Upload Your Depreciation Schedule
Already have a depreciation schedule but not sure what it's telling you? Upload it to ReportWise for a plain-English breakdown of your claimable deductions, Division 43 vs 40 split, and estimated tax savings at your marginal rate.