Division 40 and Division 43 depreciation explained for Brisbane property investors in 2026
Most Brisbane investors know depreciation exists. Far fewer understand the difference between Division 40 and Division 43, which one applies to their specific property, and how much each actually produces in real dollar savings. On a typical Brisbane new build unit in the $750,000 to $800,000 range, the two divisions combined can produce roughly $7,000 to $11,000 in first-year deductions, depending on construction cost and asset inclusions. At a 34.5% marginal tax rate, that equates to approximately $2,400 to $3,800 in tax savings, or around $45 to $75 per week. This article explains both divisions clearly, demonstrates how the numbers are typically calculated at Brisbane price points, and covers the 2017 rule change that eliminated Division 40 for most established property investors.
Illustrative figures only: Depreciation outcomes vary significantly based on construction cost, asset quality, property type and settlement timing. All dollar figures in this article are illustrative estimates based on typical Brisbane new build units. Your actual depreciation claim will differ. Always rely on a professional depreciation schedule prepared by a qualified quantity surveyor.
Property depreciation is consistently cited as one of the most underused tax deductions available to Australian investors. The ATO estimates that hundreds of thousands of investment property owners fail to claim depreciation deductions they are legally entitled to each year , either because they do not understand the rules or because they have not had a professional depreciation schedule prepared. For Brisbane investors in 2026, the depreciation rules matter more than ever because the post-budget changes to negative gearing have made the tax efficiency distinction between new build and established property wider than it has been at any point in the past decade. Understanding what Division 40 and Division 43 are, how they work together, and what they produce in real dollar terms at Brisbane price points is not optional knowledge. It is the foundation of accurate investment modelling.
The two divisions explained
The 2017 rule change and what it means for Brisbane investors today
The most important thing to understand about Division 40 is that the rules changed dramatically on 9 May 2017. Before that date, investors who purchased established properties could claim depreciation on all the plant and equipment already installed in the property at the time of purchase , the carpet, dishwasher, air conditioning and blinds the previous owner had fitted. After 9 May 2017, that changed. Investors who purchase established residential properties can no longer claim Division 40 depreciation on second-hand assets that were already in the property when they bought it.
This rule change means new build investment properties typically produce higher depreciation deductions than established properties purchased after 9 May 2017. Established properties may still offer advantages in other areas such as location, established amenity, land component and price point , the depreciation difference is one factor in the broader investment comparison, not the only one. A new build investor receives both Division 43 on the building structure and Division 40 on all the brand-new assets installed during construction , carpet, aircon, appliances, blinds, all depreciated at their full new value from day one. An investor who purchases an established property built after 1987 can claim Division 43 on the building structure but receives no Division 40 deduction on the second-hand assets already inside it.
The 2017 change did not eliminate all depreciation for established property investors. Division 43 remains fully available on all established properties provided construction was completed after 15 September 1987. An established Moorooka unit with a construction cost of $276,000 still generates a Division 43 deduction of $6,917 per year for the remaining years of the 40-year claim period. Division 40 can also still be claimed on any brand-new assets you install yourself after purchase , if you replace the carpet, install a new air conditioner, or fit new blinds after settlement, you can depreciate those new assets over their effective lives. The 2017 rule only prevents claiming on second-hand assets that were already there when you bought.
Renovations completed by previous owners after 1987 may still be claimable under Division 43, even in established properties purchased today. If a bathroom was renovated in 2015, the construction cost of that renovation can still be claimed at 2.5% per year for the remainder of its 40-year period. A qualified quantity surveyor can identify these hidden claims during their inspection. Many established property investors significantly underestimate their Division 43 entitlement because they focus only on the original construction date rather than subsequent capital works.
The real dollar figures at Brisbane price points
The figures in this section are based on simplified individual asset depreciation. In practice, Division 40 deductions may also be influenced by low-value pooling rules, immediate write-offs for low-cost assets under $300, and part-year ownership adjustments. A professional depreciation schedule will apply these rules correctly for your specific property. The illustrative figures below provide a useful guide to the order of magnitude of each claim.
The depreciation claim on any property is driven by the construction cost component of the purchase price, not the total purchase price. Land does not depreciate. A $790,500 Moorooka unit where approximately 35% of the price represents the construction cost produces a Division 43 claim on $276,675 of construction value, not on the full $790,500. Understanding this distinction is the most common source of overestimated depreciation claims in developer marketing materials, which frequently cite depreciation figures calculated on the full purchase price rather than the construction component.
| Property | Purchase price | Est. construction cost | Div 43 annual (2.5%) | Tax saving 34.5% | Tax saving 39% | Tax saving 47% |
|---|---|---|---|---|---|---|
| Moorooka unit | $790,500 | $276,675 | ~$6,900/yr | ~$2,400/yr | ~$2,700/yr | ~$3,250/yr |
| Chermside unit | $780,000 | $273,000 | ~$6,800/yr | ~$2,360/yr | ~$2,660/yr | ~$3,210/yr |
| Springfield H&L | $900,000 | $405,000 | ~$10,100/yr | ~$3,490/yr | ~$3,950/yr | ~$4,760/yr |
| Brisbane median house | $1,222,906 | $489,162 | ~$12,200/yr | ~$4,220/yr | ~$4,770/yr | ~$5,750/yr |
The construction cost figures above are PropTalk estimates based on typical land-to-construction ratios for each property type. The actual construction cost for your specific property must be determined by a licensed quantity surveyor , not estimated by you, your agent, or your broker. The ATO requires that Division 43 deductions be based on a reasonable estimate of original construction cost, and this work can only be done by a QS registered with the Tax Practitioners Board. The figures in the table above are illustrative. Your actual claim will differ.
Division 40 typical claim values , Brisbane new build unit
| Asset | Est. value | ATO effective life | DV rate | Year 1 deduction | Tax saving 34.5% |
|---|---|---|---|---|---|
| Air conditioning unit | $2,800 | 10 years | 20% | $560/yr | $193 |
| Carpet | $800 | 8 years | 25% | $200/yr | $69 |
| Dishwasher | $1,200 | 12 years | 16.67% | $200/yr | $69 |
| Hot water system | $1,500 | 12 years | 16.67% | $250/yr | $86 |
| Blinds and curtains | $600 | 8 years | 25% | $150/yr | $52 |
| Stove and oven | $1,800 | 12 years | 16.67% | $300/yr | $104 |
| Exhaust fans | $200 | 10 years | 20% | $40/yr | $14 |
| Light fittings | $300 | 5 years | 40% | $120/yr | $41 |
| Smoke alarms | $150 | 5 years | 40% | $60/yr | $21 |
| Intercom system | $800 | 10 years | 20% | $160/yr | $55 |
| Total Division 40 year 1 | $10,150 | ~$2,040/yr | $704 |
Combined Division 40 and 43 , the full picture
| Component | Annual deduction | Tax saving 34.5% | Tax saving 39% | Weekly tax saving 34.5% |
|---|---|---|---|---|
| Division 43 , building structure | ~$6,900/yr | $2,386 | $2,698 | $46/wk |
| Division 40 , plant and equipment (yr 1) | ~$2,040/yr | $704 | $796 | $14/wk |
| Total year 1 combined | ~$8,900/yr | ~$3,090 | $3,494 | ~$59/wk |
| Years 2 to 5 (Division 40 declining) | ~$8,200 to $8,500/yr | ~$2,829 to $2,933 | ~$3,198 | ~$55/wk |
| Year 6 onwards (Division 40 reducing significantly) | ~$7,000 to $7,500/yr | ~$2,415 to $2,588 | ~$2,730 | ~$47/wk |
Note on first-year claims: In the financial year of purchase, depreciation is typically pro-rated based on the settlement date. If you settle in March, you claim roughly three months of the annual depreciation for that financial year, not the full year amount. The full annual claim applies from the first complete financial year of ownership.
The combined approximately $8,900 to $9,000 in year one deductions translates to a ~$3,090 tax saving at the 34.5% marginal rate , or approximately $59 per week. That approximately $59 per week is money returned to you either via a reduced monthly PAYG withholding if you file a tax variation form with the ATO, or as a lump sum tax refund when you lodge your return. It requires no ongoing cash outlay on your part. It is often the single largest non-cash tax benefit available to a Brisbane new build investor and it is one of the primary reasons new build properties may have a materially lower true weekly holding cost than established properties in the post-budget environment.
Some investors avoid claiming depreciation because they believe it will increase their capital gains tax liability when they eventually sell. This misunderstanding is surprisingly common and can be costly. Capital works deductions under Division 43 reduce your property's CGT cost base by the amount you were entitled to claim, regardless of whether you actually claimed it. If you were entitled to claim $6,900 in Division 43 but chose not to, the ATO will still reduce your cost base by $6,900 when you sell. You pay the CGT either way. The treatment of plant and equipment under Division 40 differs and should be confirmed with your registered tax agent for your specific situation. Not claiming Division 43 depreciation to avoid CGT is paying twice for a benefit you never received.
Many investor projections overestimate depreciation by applying the 2.5% rate to the full purchase price rather than the construction component only. Others assume all plant and equipment qualifies for Division 40 when eligibility depends on whether the property is new and whether the items were installed brand new. Always rely on a professional depreciation schedule rather than developer marketing estimates, online calculators, or the figures in this article. The only accurate depreciation claim is one prepared by a qualified quantity surveyor who has inspected your specific property.
Who can prepare a depreciation schedule and what it costs
A qualified quantity surveyor is the most widely accepted professional to prepare an ATO-compliant depreciation schedule, particularly when construction costs need to be estimated. The ATO requires that construction cost estimates be prepared by a suitably qualified person , in practice this means an AIQS-registered quantity surveyor, though other qualified professionals may be acceptable in limited circumstances. Your registered tax agent can confirm what is required for your specific situation.
A residential depreciation schedule in Brisbane typically costs $385 to $770 for the initial report, with some firms charging more for houses with higher construction values. The schedule is itself tax deductible as a property management expense in the year it is incurred. On a $790,500 Moorooka unit generating ~$3,090 per year in tax savings, a $600 depreciation schedule cost is recovered in the first two months of year one and produces a net saving every year for the remaining 37 years of the Division 43 claim period.
The schedule is prepared once and remains valid for the life of your ownership of the property. You do not pay for a new schedule each year. Your accountant uses the schedule when preparing your annual tax return. If you make significant capital improvements to the property after the schedule was prepared, you may need an updated schedule to capture the new assets , but the original schedule remains valid for all items already listed.
Commission your depreciation schedule as soon as possible after settlement , ideally within the first few months of ownership. The QS will inspect the property, document all depreciable assets, estimate construction costs, and produce the schedule. You can still commission a schedule years after purchase and claim the depreciation retrospectively via an amended tax return for the previous two years. If you have owned an investment property without a depreciation schedule for several years, speak to your accountant about what you may be entitled to recover.
Division 40 and 43 in the post-budget 2026 context
The Federal Budget 2026 announced changes to negative gearing treatment for established properties purchased after 12 May 2026. Under those announced changes, losses from established properties would be ring-fenced from 1 July 2027. New builds were announced as exempt. These changes were a key part of the budget announcement , always confirm the current legislative position with your accountant as tax policy can change between announcement and implementation.
In this environment, depreciation is not just a tax benefit , it is a structural component of the new build investment case. The Division 43 and Division 40 deductions available on a new build do not merely reduce the tax payable on the rental loss. They are part of the calculation that determines whether the investment is negatively or positively geared in the first place. A $790,500 Moorooka unit with a rental loss of $16,000 per year before depreciation becomes a loss of roughly $7,000 after the depreciation claim is added. Under the announced policy settings, new builds are intended to retain full deductibility against wages , meaning, if implemented as proposed, this loss would produce a meaningful tax refund that offsets the out-of-pocket holding cost. Confirm the current position with your accountant before lodging.
Division 40 and 43 are not a footnote in Brisbane property investment. For new build investors in particular, they are an important component of the investment calculation , worth roughly $45 to $75 per week on a typical new build unit in the $750,000 to $800,000 range, depending on construction cost and inclusions.
On a typical Brisbane new build unit in that price range, the combined first-year deductions of roughly $7,000 to $11,000 can produce a tax saving of approximately $2,400 to $3,800 at the 34.5% marginal rate. That saving is available every year for the life of your ownership, it requires no ongoing cash outlay, and it is available under ATO rules when supported by a professionally prepared depreciation schedule. The 2017 rule change that eliminated Division 40 on established properties purchased after 9 May 2017 makes this depreciation advantage specific to new builds , a meaningful consideration when comparing new and established investment properties at similar price points. Commission the schedule. Claim what you are entitled to. And confirm all of this with your registered tax agent before lodging.
Division 43 and Division 40 rules: ATO.gov.au, Capital Works Deductions (Division 43) and Rental Properties Guide 2025-26. Division 43 rate 2.5% per year over 40 years, prime cost method only, residential properties where construction commenced after 15 September 1987. Property Tax Tools, Investment Property Depreciation Guide Div 40 and Div 43, updated 21 May 2026. WealthWorks, Property Depreciation for Investment Properties Division 40 and Division 43 Guide Australia 2026, April 2026: diminishing value method front-loads deductions, preferred by most investors. 2017 rule change: Treasury Laws Amendment (Housing Tax Integrity) Act 2017, effective 9 May 2017 , Division 40 depreciation on second-hand assets in residential properties purchased after that date no longer available for individual investors. Division 40 remains available on new assets installed post-purchase. Buyers Agency Australia, Property Depreciation Australia Explained, April 2026: new properties typically $10,000 to $19,000 in year one, established properties Division 43 only $4,000 to $9,000/yr. QS schedule cost: $385 to $770 for residential, fully tax deductible in year incurred. TPB registration: Tax Practitioners Board registration required for all QS preparing ATO-compliant depreciation schedules. CGT and depreciation interaction: ATO cost base rules reduce cost base by depreciation entitled to claim regardless of actual claims made. Construction cost estimates in this article are PropTalk illustrative estimates based on typical land-to-construction ratios. Actual construction costs must be determined by a licensed quantity surveyor. All tax benefit calculations assume 34.5% or 39% marginal rate including Medicare levy for illustrative purposes. This article does not constitute financial or tax advice. Always consult a registered tax agent and licensed quantity surveyor for advice specific to your property and personal tax position.