Property Depreciation Schedule Australia 2026: Division 40 & 43 Guide for Investors

Last updated: July 2026  |  Reading time: 11 min

When I bought my first investment property, my accountant asked at tax time whether I had a depreciation schedule. I didn't — I hadn't even heard of one. Turned out I'd been leaving roughly $6,000 in deductions unclaimed every year. I had the schedule done retrospectively and amended two years of tax returns. It cost me $650 for the report and came back more than ten times that in deductions over the following three years.

A depreciation schedule is one of the few tax deductions available to property investors that requires no cash outlay in the year you claim it. It's the ATO's recognition that your asset is physically wearing out — and that wear is a legitimate cost of running an investment. Here's how it works and why most investors with property built after 1987 should have one.

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The Two Types of Depreciation — Division 40 and Division 43

Australian tax law divides property depreciation into two separate categories under the Income Tax Assessment Act 1997:

Division 43

Capital Works (Building Structure)

• Walls, roof, foundations, concrete slab
• Fixed built-in items (kitchen cabinetry, tiling)
• Bathroom fixtures permanently installed
• Claimed at 2.5% per year for 40 years
• Based on original construction cost (not purchase price)
• Available to all owners regardless of 2017 rule change

Division 40

Plant & Equipment (Removable Assets)

• Air conditioning, hot water systems
• Carpets, blinds, curtains
• Dishwashers, ovens, exhaust fans
• Smoke alarms, garage door motors
• Claimed over each asset's effective life
• Restricted for established properties post-2017

The 2017 rule change — critical for established property buyers: From 9 May 2017, investors who purchase second-hand residential properties can only claim Division 40 depreciation on new assets they personally install. Pre-existing plant and equipment in established homes can no longer be claimed. This doesn't affect Division 43 — the building structure can still be claimed by all owners regardless of when they bought.

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Typical Annual Depreciation by Property Type

These are indicative figures based on quantity surveyor industry data. Actual amounts depend on construction cost, year built, finishes, and location.

Property type	Div 43 (annual)	Div 40 (year 1)	Total year 1
New apartment (2023 build, $650k purchase)	~$6,500	~$5,000–$8,000	~$11,500–$14,500
New house (2022 build, $750k purchase)	~$8,500	~$6,000–$10,000	~$14,500–$18,500
Established apartment (2005 build, post-2017 purchase)	~$4,000–$6,000	New items only	~$4,000–$6,000
Established house (1995 build, post-2017 purchase)	~$5,000–$9,000	New items only	~$5,000–$9,000

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Depreciation & Tax Saving Estimator

🏗️ Property Depreciation Estimator — 2026-27

Estimate your annual depreciation deductions and tax saving. Not a substitute for a quantity surveyor report.

Property type New apartment (built 2018 or later) New house (built 2018 or later) Established property (built 1988–2017, bought post May 2017) Built before 15 September 1987

Purchase price / construction cost

$650,000

Your marginal tax rate (incl. Medicare levy) 19% + 2% Medicare = 21% (income $18,201–$45,000) 32.5% + 2% Medicare = 34.5% (income $45,001–$135,000) 37% + 2% Medicare = 39% (income $135,001–$190,000) 45% + 2% Medicare = 47% (income $190,001+)

Division 43 — Capital Works

Est. construction cost

$390,000

land excluded (~60% of purchase)

Annual Div 43 deduction

$9,750

at 2.5% per year

Division 40 — Plant & Equipment (Year 1)

Est. Div 40 (year 1)

$6,500

diminishing value method

Div 40 eligible?

Yes — new property

Total Tax Saving

Total deduction (year 1)

$16,250

Tax saving (year 1)

$5,606

Div 43 over 10 years

$33,806

cumulative tax saving

QS Report ROI: A depreciation schedule costs approximately $600–$800. At your tax rate, the first-year tax saving of $5,606 means the report pays for itself 7x over in year one alone.

Estimates only. Construction cost estimated at 60% of purchase price for apartments and 55% for houses — actual split varies significantly. Div 40 year 1 estimated at typical industry averages. Always obtain a professional quantity surveyor report for accurate, ATO-defensible figures.

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Common Division 40 Assets and Their Effective Lives

Asset	Effective life	DV rate (approx.)
Air conditioning (split system)	10 years	20% per year
Hot water system	12 years	16.67%
Carpet	10 years	20%
Blinds / curtains	6–10 years	20–33%
Dishwasher	10 years	20%
Oven / cooktop	12 years	16.67%
Smoke alarms	6 years	33%
Garage door motor	10 years	20%
Ceiling fans	10 years	20%
Intercom system	10 years	20%

The Diminishing Value (DV) method applies the rate to the asset's remaining book value each year — giving larger deductions early on. The Prime Cost (PC) method claims the same fixed amount each year. Most investors choose DV to maximise early-year deductions, but your quantity surveyor can advise which suits your strategy.

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Who Prepares the Schedule — and Why It Has to Be a Quantity Surveyor

The ATO requires depreciation schedules to be prepared by a qualified quantity surveyor (Tax Ruling TR 97/25). Your accountant cannot prepare this report — not because the law prohibits it, but because they don't have the construction cost expertise required to estimate original build costs for Division 43 purposes.

A quantity surveyor will physically inspect your property (or for simpler cases, assess it remotely), measure and document every structural and movable component, research original construction costs using industry databases, and produce a fully ATO-compliant schedule. The schedule typically arrives within 5 business days of the inspection.

Cost and deductibility: A depreciation schedule typically costs $600–$850 for a standard residential property. That fee is itself fully tax-deductible as a property management expense in the year you pay it. For most properties built post-1990, the first-year deduction from the schedule far exceeds the cost of obtaining it.

What to look for in a quantity surveyor

• Registered with the Australian Institute of Quantity Surveyors (AIQS)
• Registered as a Tax Practitioner with the TPB (Tax Practitioners Board)
• Provides a free preliminary estimate before you commit
• Offers both on-site and remote assessment options

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The CGT Catch — What Happens When You Sell

This is the part most investors don't find out until they sell, and it catches people off guard.

Capital works deductions claimed under Division 43 reduce your property's CGT cost base when you sell. If you've claimed $50,000 in Division 43 deductions over 10 years and you sell for a $300,000 gross gain, the ATO calculates the gain against your reduced cost base — meaning your taxable gain is effectively $350,000 (before any CGT discount applies).

Division 40 plant and equipment deductions do not reduce your CGT cost base — they're handled as a separate balancing adjustment when each asset is disposed of.

Still worth it: Even after the cost base reduction, the net position is almost always positive. You've effectively had use of the deduction money (and the tax saving on it) for years before repaying some of it via CGT at sale. Factor in the CGT discount (50% for properties held over 12 months) and the time value of money, and most investors come out well ahead by claiming depreciation throughout their holding period.

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Common Questions

I've owned my property for 3 years without a schedule — can I still get one? ▼

Yes — and you should. Most quantity surveyors can prepare a retrospective schedule covering your full ownership period. The ATO allows individuals to amend tax returns up to 2 years prior, so you can reclaim missed deductions for those years. For the earlier years, the deduction history is documented in the schedule and carried forward. Get the schedule done as soon as possible — every year without one is money left on the table.

My property was built in 1980 — can I claim anything? ▼

Division 43 capital works requires the building to have commenced construction after 15 September 1987. If yours is older, you generally can't claim the building structure. However, if the property has had structural renovations or capital improvements in the past 40 years, those renovation costs may still be claimable at 2.5%. Division 40 is available for any new assets you personally install, regardless of the building's age. A quantity surveyor can assess what's claimable in your specific situation.

Do I need a new schedule if I renovate? ▼

Yes — if you undertake significant capital improvements, you should have your existing schedule updated or a supplementary schedule prepared to capture the new assets and capital works costs. Keep all renovation invoices and receipts. New items you install (carpets, appliances, air conditioning) become claimable Division 40 assets regardless of whether the property is new or established — it's only the pre-existing assets in an established property that are restricted under the 2017 rules.

Can I claim depreciation on a property I live in part of the year? ▼

Yes, but only for the portion of the year it's used as an investment (i.e., rented or genuinely available for rent). If your property is rented for 6 months and occupied by you for 6 months, you can claim 50% of the annual depreciation deduction. The quantity surveyor prepares the full schedule and you (or your accountant) apply the appropriate apportionment percentage at tax time.

How does the PAYG variation work with depreciation? ▼

Once you have a depreciation schedule, you can apply to the ATO for a PAYG (Pay As You Go) withholding variation. This reduces the tax withheld from your salary throughout the year to account for your expected rental losses and depreciation deductions — meaning you get the benefit of your deductions in your fortnightly or monthly take-home pay, rather than waiting for a lump sum refund after lodging your tax return. Ask your accountant or registered tax agent to set this up for you.

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Related Articles

• Negative Gearing Australia 2026: How It Works and What Changed After the Budget
• Work-Related Tax Deductions You Can Claim in 2026
• First Home Buyer Guide Australia: Your Step-by-Step Path (2026)

Sources: ATO — Capital Works Deductions (Division 43), ATO — Decline in Value (Division 40)

Disclaimer: This article is general information only and does not constitute financial or tax advice. Depreciation rules, effective lives, and ATO requirements change over time. Always consult a registered tax agent and engage a qualified, AIQS-registered quantity surveyor for advice specific to your property and circumstances.