Property depreciation explained - how Brisbane investors legally save thousands in tax
Buyers Agency Australia (April 2026), WealthWorks Division 40 and 43 guide (April 2026), BMT Tax Depreciation, Washington Brown, Australian Property Experts depreciation guide (April 2026), and ATO Tax Ruling TR 97/25.
Depreciation is the largest tax deduction most property investors never claim. It requires no cash outlay, is fully ATO-compliant, and can generate $5,000 to $15,000 in first-year deductions alone. Here is how it works and how to claim it.
Most first-time investors know they can claim interest, rates, and property management fees. Far fewer claim depreciation - and the ones who skip it are leaving thousands of dollars on the table every single financial year. The Australian Taxation Office estimates that hundreds of thousands of investment property owners fail to claim depreciation deductions they are legally entitled to.
The reason it gets missed is that it feels complicated. It is not. Once you understand the two categories of depreciation and spend a few hundred dollars on a quantity surveyor's report, it essentially runs itself. Your accountant claims it at tax time, and you get the benefit in your refund or reduced tax bill - every year, for up to 40 years.
- 1.What is property depreciation
- 2.Division 43 - Capital Works
- 3.Division 40 - Plant and Equipment
- 4.How much can you realistically claim
- 5.How to get your depreciation schedule
- 6.The CGT interaction
- 7.New property vs established
What is property depreciation
Depreciation is the ATO's recognition that buildings and their contents lose value over time through normal wear and tear. Rather than letting this value evaporate silently, the ATO allows investment property owners to claim it as a tax deduction each year - even though no cash leaves your account to generate the claim. It is what accountants call a non-cash deduction: you get the tax benefit without spending anything in the current year.
There are two entirely separate categories of depreciation available on investment properties, and understanding both is essential to maximising your claim.
Division 43 - Capital Works
Division 43 covers the structural components of the building - the concrete slab, brickwork, roof, internal walls, built-in wardrobes, fixed kitchen cabinets, and similar permanent elements. The ATO allows you to claim 2.5% of the original construction cost per year, for up to 40 years from the date construction was completed. A property that cost $300,000 to build generates $7,500 per year in Division 43 deductions. Construction must have commenced after 15 September 1987. You can claim Division 43 on a property you did not build yourself - the key is when it was built, not when you bought it. A good quantity surveyor will estimate the original construction cost of any post-1987 property.
Division 40 - Plant and Equipment
Division 40 covers the removable or mechanical assets inside the property - items that have their own effective life as determined by the ATO. Each asset depreciates over its individual effective life, and the Diminishing Value method front-loads the deductions, giving you larger claims in the earlier years. Claimable items include: air conditioning units and ceiling fans, carpets and floor coverings, blinds and curtains, hot water systems, ovens, cooktops, and dishwashers, smoke alarms and security systems. Important 2017 rule change: for properties purchased after 9 May 2017, you can only claim Division 40 on second-hand plant and equipment that you personally installed - not on existing assets that were there when you bought. New properties are fully claimable. This is one reason new builds often generate significantly higher first-year depreciation than equivalent second-hand properties.
How much can you realistically claim
| Metric | What it includes | Typical result |
|---|---|---|
| Brand new house or townhouse | Full Div 43 plus Div 40 on all new assets | $10,000-$20,000+ first year |
| New apartment (quality finishes) | Full Div 43 plus higher Div 40 on inclusions | $8,000-$15,000 first year |
| Post-1987 established property | Div 43 only plus any assets you install | $3,000-$8,000 first year |
| Pre-1987 established property | Limited to Div 40 on assets you install plus renovations | $1,000-$4,000 first year |
| Renovated established property | Renovation creates new Div 43 deductions | $5,000-$12,000 first year |
Source: Buyers Agency Australia, WealthWorks, BMT Tax Depreciation, and Australian Property Experts - 2026 depreciation guides. These are indicative ranges. Your actual claim depends on the property's construction cost, age, quality of finishes, and what plant and equipment is present.
A typical depreciation schedule costs $600 to $900 and is itself 100% tax deductible. Most reputable quantity surveyors offer a guarantee: if they do not find double their fee in first-year deductions, the report is free. For a new Brisbane unit with quality finishes, the first-year claim alone often returns 10 to 15 times the cost of the report.
How to get your depreciation schedule
The CGT interaction
Division 43 deductions you claim over your ownership period reduce your property's cost base for capital gains tax purposes. This means your capital gain on sale will be higher by the amount of building allowance claimed. However, if you have held the property for more than 12 months and qualify for the 50% CGT discount, the depreciation deductions claimed during ownership almost always leave you better off financially than if you had not claimed them. Your accountant can model this for your specific situation.
New property vs established - which generates more depreciation
New properties generate the most depreciation. A brand new Brisbane unit with quality finishes can produce $10,000 to $15,000 in first-year deductions - the full Division 43 rate on current construction costs plus Division 40 on all fixtures at their full new value. This is one of the genuine financial advantages of new property that the marketing material does not always articulate clearly.
Established properties built after 1987 still generate meaningful Division 43 claims based on the estimated original construction cost, plus Division 40 on any new assets you install. Established properties built before 1987 have no Division 43 entitlement but can still claim Division 40 on assets you purchase and install during your ownership.
Do not assume an older property has no depreciation value - have it assessed. Many post-renovation properties carry significant unclaimed Division 43 deductions from the renovation work, regardless of when the original building was constructed.
This article is general information only and does not constitute financial, tax, or legal advice. Depreciation information sourced from Buyers Agency Australia (April 2026), WealthWorks, BMT Tax Depreciation, Washington Brown, Australian Property Experts (April 2026), and ATO Tax Ruling TR 97/25. Always consult a registered tax agent and qualified quantity surveyor before making depreciation claims on your investment property.
General information only. This article does not constitute financial, legal, or investment advice. Always consult a licensed financial adviser or mortgage broker before making investment decisions.
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