A depreciation schedule is one of the most powerful — and most overlooked — tools for property investors. It can unlock thousands of dollars in tax deductions each year without costing you a cent in actual expenses.

Yet research suggests up to 80% of property investors don't claim the full depreciation they're entitled to.

This guide explains what a depreciation schedule is, how it works, and why every serious investor should have one.

What Is a Depreciation Schedule?

A depreciation schedule is a detailed report that lists all the items in your investment property that decline in value over time, and calculates how much you can claim as a tax deduction each year.

Think of it this way: everything in a property wears out eventually. The carpet gets worn, the paint fades, the hot water system ages. The ATO allows you to claim this "wear and tear" as a tax deduction — even though you're not spending any money.

A qualified quantity surveyor inspects your property and produces a schedule that covers up to 40 years of deductions, broken down year by year.

How Depreciation Saves You Tax

Depreciation is a non-cash deduction. Unlike paying for repairs or insurance, you don't actually spend money — but you still get the tax benefit.

Example

Item	Annual Depreciation
Building structure (Div 43)	$7,500
Carpet	$1,200
Hot water system	$450
Air conditioning	$650
Blinds	$300
Smoke alarms	$80
Light fittings	$150
Total depreciation	$10,330

At a 37% marginal tax rate, $10,330 in depreciation deductions saves $3,822 in tax — and you didn't spend a dollar.

This is why depreciation often turns a negatively geared property even more tax-effective, or pushes a marginally positive property into a better cash flow position after the tax benefit.

Division 43 vs Division 40: The Two Types of Depreciation

The ATO divides depreciable items into two categories, each with different rules.

Division 43: Capital Works

This covers the building structure itself — the permanent, fixed elements.

Includes:

Walls, floors, ceilings
Roof
Doors and windows
Built-in wardrobes and cupboards
Kitchen and bathroom fixtures (built-in)
Driveways, fencing, retaining walls

Depreciation rate: 2.5% per year for 40 years

Eligibility: Property must have been constructed after 15 September 1987.

Example: A property with a construction cost of $350,000 provides a $8,750 deduction every year for 40 years.

Division 40: Plant and Equipment

This covers removable items — fixtures and fittings that aren't part of the structure.

Includes:

Carpet and blinds
Hot water systems
Air conditioning units
Ovens, cooktops, dishwashers
Smoke alarms
Light fittings
Ceiling fans
Garage door motors

Depreciation rate: Varies by item based on "effective life" (set by the ATO)

Item	Effective Life	Annual Depreciation Rate
Carpet	8 years	12.5%
Blinds	5 years	20%
Hot water system	10 years	10%
Air conditioning	10 years	10%
Oven	12 years	8.3%
Smoke alarms	5 years	20%

The 2017 Rule Change (Important)

If you purchased a second-hand property after 9 May 2017, you can only claim Division 40 depreciation on items you purchase and install — not items that were already in the property.

This doesn't affect:

Properties purchased before 10 May 2017 (grandfathered)
New properties where you're the first owner
Division 43 (building structure) — still fully claimable

This change makes it even more important to get a professional schedule that correctly identifies what you can and can't claim.

How Much Can You Claim? (Real Example)

Let's look at a typical investment property.

Property Details

Type: 3-bedroom house
Built: 2008
Purchase price: $650,000
Land value: $250,000
Construction cost: $400,000

First Year Depreciation Estimate

Category	Deduction
Division 43 (building)	$10,000
Division 40 (plant & equipment)	$4,500
Total Year 1	$14,500

At a 37% marginal rate, that's $5,365 in tax savings — in year one alone.

Cumulative Over 5 Years

Year	Div 43	Div 40	Total	Tax Saving (37%)
1	$10,000	$4,500	$14,500	$5,365
2	$10,000	$3,800	$13,800	$5,106
3	$10,000	$3,200	$13,200	$4,884
4	$10,000	$2,700	$12,700	$4,699
5	$10,000	$2,300	$12,300	$4,551
5-Year Total	$50,000	$16,500	$66,500	$24,605

Over 5 years, this investor saves nearly $25,000 in tax from depreciation alone.

Do Older Properties Qualify?

Yes — but with limitations.

Properties Built Before 15 September 1987

Division 43: Generally not available (building structure)
Division 40: Available for items you've installed since purchase

Properties Built After 15 September 1987

Division 43: Full 2.5% annual claim available
Division 40: Available for items installed by original owner (if you bought before May 2017) or items you install (if bought after May 2017)

Renovated Properties

If the property has been renovated — whether by you or previous owners — those renovations may qualify for Division 43 depreciation, even if the original structure was built before 1987.

A quantity surveyor can identify renovation works and their approximate construction dates.

Bottom line: Even "old" properties often have significant depreciation available. It's always worth getting a schedule.

How to Get a Depreciation Schedule

Step 1: Engage a Quantity Surveyor

Quantity surveyors are the only professionals the ATO recognises as qualified to estimate construction costs for depreciation purposes.

Look for a surveyor who:

Is a registered tax agent or works with one
Is a member of the Australian Institute of Quantity Surveyors (AIQS)
Specialises in tax depreciation (not just construction costing)
Offers a fee guarantee (many guarantee to find more than their fee in first-year deductions)

Step 2: Property Inspection

The surveyor will inspect your property (in person or via detailed photos/virtual tour) to identify:

Construction date and type
All Division 43 items
All Division 40 items
Any renovations or additions

Step 3: Receive Your Schedule

You'll receive a comprehensive report showing:

Year-by-year deductions for up to 40 years
Breakdown by Division 43 and Division 40
Individual asset listings

Step 4: Give It to Your Accountant

Your accountant uses the schedule to claim depreciation in your tax return each year. No additional work needed until you renovate or replace assets.

What Does a Depreciation Schedule Cost?

Typical costs:

Property Type	Cost Range
Standard house or unit	$400–$700
Large or complex property	$700–$900
Commercial property	$800–$1,500+

The cost is 100% tax-deductible in the year you pay it.

Most reputable surveyors offer a fee guarantee: if they don't find at least double their fee in first-year deductions, you don't pay. This makes it essentially risk-free.

ROI Example

Schedule cost: $660
First-year depreciation found: $12,000
Tax saving (37% rate): $4,440
Return on investment: 6.7x

When to Get a Depreciation Schedule

Best Time: Immediately After Settlement

Get a schedule as soon as you purchase. This ensures:

You claim from day one
The inspection happens before tenants move in (easier access)
You don't lose years of unclaimed deductions

Already Own Property?

It's not too late. You can get a schedule at any time and:

Start claiming immediately
Amend previous tax returns (generally up to 2 years back)

Talk to your accountant about catching up on missed deductions.

After Renovations

If you've renovated, get your schedule updated to capture the new assets. Major renovations can add thousands in additional annual deductions.

Depreciation and Your Tax Position

Understanding how depreciation fits into your overall tax position helps you plan better.

Depreciation and Negative Gearing

Depreciation increases your deductible expenses without increasing your cash outflow. This can:

Push a cash-flow positive property into a paper loss (more tax back)
Reduce the cash shortfall on a negatively geared property

Depreciation and Cash Flow

Because depreciation is non-cash, your actual cash position is better than your "on paper" position. When planning cash flow, separate:

Cash expenses (interest, management fees, rates, repairs)
Non-cash deductions (depreciation)

Propperly tracks both — showing you your true cash position AND your tax position in real-time →

Depreciation and Capital Gains Tax

When you sell, any Division 43 deductions claimed are subtracted from your cost base, potentially increasing your capital gain.

Example:

Purchase price: $500,000
Division 43 claimed over 10 years: $75,000
Adjusted cost base: $425,000
Sale price: $700,000
Capital gain: $275,000 (instead of $200,000)

However, you've received the tax benefit of $75,000 in deductions along the way. In most cases, the annual tax savings outweigh the eventual CGT impact — especially with the 50% CGT discount for properties held over 12 months.

FAQ: Property Depreciation

Can I prepare my own depreciation schedule?

For Division 43 (building structure), the ATO requires estimates from a qualified quantity surveyor. For Division 40 items you've purchased, you can calculate depreciation yourself if you have receipts — but a professional schedule ensures accuracy.

What if I don't know when my property was built?

The quantity surveyor can determine this through council records, architectural styles, and materials used.

Do I need a new schedule every year?

No. A depreciation schedule covers up to 40 years. You only need an update if you renovate or add significant assets.

Can I claim depreciation on my home if I later rent it out?

Yes, but only from the date it becomes a rental. A surveyor can back-calculate the remaining depreciation based on when you first rented it out.

What about furnished properties?

Furniture you provide (beds, sofas, dining tables) is also depreciable under Division 40. A schedule should capture these items.

Summary

A depreciation schedule unlocks thousands in tax deductions you'd otherwise miss
Two types: Division 43 (building) and Division 40 (plant & equipment)
2017 rule change limits Division 40 claims on second-hand properties bought after May 2017
Cost: $400–$700 — fully tax-deductible and typically pays for itself many times over
Get it early — ideally right after settlement
Even older properties qualify — renovations and installed items are still claimable

Already have a schedule? Upload it to Propperly and we'll track your depreciation claims automatically →

Last updated: January 2025. This guide is for general information only and does not constitute tax advice. Consult a registered tax agent for advice specific to your situation.

Property Depreciation Schedule Guide Australia | Propperly