How much can you claim on your investment property depreciation schedule?

Division 43 (capital works) allows investors to claim 2.5% of the original construction cost of a residential building each year for up to 40 years from the date of construction. To be eligible, the building must have been constructed after 15 September 1987. If you paid $400,000 to construct the building, your annual Div 43 allowance is $10,000 — regardless of what you paid for the property overall.

Division 40 covers plant and equipment items inside the property — things like air conditioning units, carpets, dishwashers, hot water systems, and blinds. The diminishing value method applies a rate of 200% divided by the asset's effective life. For a carpet with a 10-year effective life the rate is 20%, so a $5,000 carpet generates a $1,000 deduction in year 1, $800 in year 2, and so on.

No. From 9 May 2017, investors who purchase a second-hand (established) residential property cannot claim Div 40 deductions on the plant and equipment already in the property at purchase. You can still claim Div 40 on new items you install after settlement. New residential properties and all commercial properties (new or established) are unaffected by this rule.

The Div 43 basis is the original cost to construct the building, not your purchase price. For new properties this is stated on your contract. For established properties, a quantity surveyor can estimate the construction cost based on the building's age, size, and specifications — this is typically included in a full tax depreciation schedule. The ATO allows the surveyor's estimate as the basis for Div 43 claims.

For most investment property owners, yes. A full depreciation schedule from a registered quantity surveyor costs $500–$700 and is itself tax-deductible. For a new property with a $500,000 construction cost and $25,000 in plant and equipment, the schedule can generate $17,500+ in year-1 deductions — saving a top-rate investor over $8,000 in tax. The schedule pays for itself many times over.

Residential buildings completed on or before 15 September 1987 are not eligible for Div 43. Commercial buildings completed before 20 July 1982 are also ineligible. Once a building has been depreciated for 40 years from its completion date, Div 43 ceases — the maximum total claim is 100% of the original construction cost (40 × 2.5%). Vacant land and buildings used for private purposes cannot be claimed.

Under the diminishing value method, the annual deduction is calculated as: opening pool balance × (200% ÷ effective life). Because the deduction reduces the pool balance each year, subsequent deductions are smaller. This front-loads the tax benefit, giving investors their largest deduction in the first year. The alternative prime cost method spreads the deduction evenly over the asset's effective life, but most investors choose diminishing value for the higher early deductions.

Yes — and this is one of the most powerful uses of property depreciation. Because Div 43 and Div 40 are non-cash deductions, they increase your rental loss without requiring you to spend money that year. A property that is cash-flow neutral or mildly positive can become negatively geared on paper once depreciation is included, giving you an additional tax deduction against your salary income.

Not always. If you built the property yourself or purchased it new, the construction cost is documented in your contracts and no surveyor is required. However, for established properties where the original construction cost is unknown, the ATO requires an estimate from a qualified cost estimator (typically a quantity surveyor). Without a legitimate cost estimate, you cannot claim Div 43 on the building works.