Tax depreciation schedules explained for Australian property investors.
Depreciation is usually the largest non-cash deduction available on an investment property, and on a brand-new build it is available in full. This guide covers what a schedule is, how Division 40 and Division 43 deductions differ, what a schedule costs, and how the deductions flow through to your weekly holding cost.
- Division 43 capital works: generally 2.5% per year for 40 years
- Division 40 plant and equipment: claimed over each asset's effective life
- New builds retain the full Division 40 entitlement
- Schedules are prepared by a qualified quantity surveyor
- The schedule fee is itself tax deductible
- Deductions reduce taxable income, not your cash outlay
What a tax depreciation schedule actually is
A tax depreciation schedule is a report prepared by a qualified quantity surveyor that sets out, year by year, the decline in value of your investment property's building and its assets. Your accountant enters those figures into your return as deductions.
It is a non-cash deduction — you claim it without spending anything in that year. That is what makes it different from interest, rates or property management fees, and why it has such a direct effect on after-tax holding costs.
Division 40 versus Division 43
Division 43 — capital works. The structure itself: walls, roof, windows, tiling, driveways, retaining walls, fixed cabinetry. Claimed at a flat rate, generally 2.5% per year across 40 years from completion.
Division 40 — plant and equipment. Removable and mechanical assets: carpet, blinds, cooktops, ovens, dishwashers, air conditioning, hot water systems, smoke alarms. Each asset has its own effective life set by the ATO, so these deductions are front-loaded in the early years.
Understanding the split matters because the two divisions behave differently over time — and because the 2017 rules treat them differently depending on whether the property was new when you bought it.
Why new builds are treated more generously
Investors who purchase an established residential property generally cannot claim Division 40 deductions on the existing plant and equipment. Buy a brand-new property and both Division 40 and Division 43 are available in full from the first day it is available for rent.
Combined with the 2026 rules restricting negative gearing and the CGT discount to new builds, the tax treatment of new stock is materially stronger than established stock — which is why every property we source is brand new.
How to get a schedule prepared
Engage a qualified quantity surveyor once the property is available for rent. Ask for an upfront estimate of first-year deductions — a reputable firm will tell you if a schedule is not worth preparing. The fee is deductible, and one schedule covers up to 40 years, with updates after renovation.
One caution: capital works claimed under Division 43 generally reduce your cost base and can increase the capital gain on sale. Depreciation is a cash-flow and timing benefit, not a free lunch. Talk it through with your accountant.
This guide is general information only and is not tax, financial or legal advice. Depreciation outcomes depend on your circumstances — confirm with a registered tax agent before acting.
Frequently asked questions
What is a tax depreciation schedule?
It is a report prepared by a qualified quantity surveyor that lists the decline in value of your investment property's building structure and its plant and equipment assets, year by year. Your accountant uses it to claim depreciation deductions in your tax return.
What is the difference between Division 40 and Division 43?
Division 43 covers capital works — the building structure and fixed items such as walls, roofing, tiling and driveways, generally claimed at 2.5% per year for 40 years. Division 40 covers plant and equipment — removable assets such as carpet, blinds, air conditioning, ovens and hot water systems, each depreciated over its own effective life.
Can I claim depreciation on a second-hand property?
Since the 2017 changes, Division 40 plant and equipment deductions are generally unavailable to investors who buy an established residential property. Division 43 capital works may still be claimable where the build date qualifies. Brand-new properties retain the full Division 40 and Division 43 entitlement, which is one of the main reasons new builds are the focus of our sourcing.
How much does a depreciation schedule cost?
A residential schedule typically costs a few hundred dollars and the fee itself is tax deductible. Ask your quantity surveyor for an estimate of first-year deductions before you commit — reputable firms will tell you if a schedule is not worth preparing.
When should I get a schedule prepared?
As soon as the property is available for rent. A schedule is prepared once and lasts up to 40 years, and it can be updated after renovations. If you have missed claims in prior years, your accountant may be able to amend earlier returns.
Does depreciation affect capital gains tax?
Yes. Capital works deductions claimed under Division 43 generally reduce your property's cost base, which can increase the assessable capital gain when you sell. This is a timing and structuring question worth discussing with your accountant.
See what depreciation does to your holding cost
We'll model the after-tax weekly position on a specific new build against your income and structure — no service fee, we're paid by the vendor.