For many property investors, it can be one of the most significant deductions available, depending on the property.
Tax depreciation lets property investors claim deductions for the wear and tear of a building (Division 43) and the plant and equipment inside it (Division 40). These deductions can lower taxable income, which may reduce the tax payable, depending on individual circumstances. A depreciation schedule is the document that makes those deductions usable: without it, your accountant has no basis to claim them.
If you own a residential or commercial investment property and don’t have a current schedule in place, you may be leaving legitimate deductions unclaimed: research suggests many investors do not claim all the depreciation available to them. This guide explains what a depreciation schedule contains, who can prepare one, what it costs, how long it lasts, and what the rules are for older or second-hand properties.
What is a depreciation schedule, exactly?
A depreciation schedule is a detailed report listing every depreciable asset in your investment property, grouped into two categories under the Australian tax system: Division 43 Capital Works and Division 40 Plant and Equipment.
Division 43 covers the building structure itself: the concrete slab, the walls, the roof, the flooring substrate, stairwells, and permanent fixtures. For residential properties where construction commenced after 15 September 1987, these are claimed at 2.5% a year for up to 40 years from the date construction was completed (a 4% rate over 25 years applies to some commercial and short-term accommodation buildings, and to residential construction between 18 July 1985 and 15 September 1987).
Division 40 covers removable items: ovens, carpets, air conditioning units, blinds, dishwashers, hot water systems, light fittings, ceiling fans, and similar assets. Each of these is depreciated over its effective life, using either the prime cost or diminishing value method.
Effective lives are set by the ATO’s Income Tax (Effective Life of Depreciating Assets) Determination 2025 (LI 2025/20).
The schedule lists each asset, its current value, its remaining effective life, and the annual deduction it produces. Your accountant takes those figures and applies them directly to your tax return. You don’t need to do anything new each year: the schedule does the work once and continues working for the life of the property (unless the property undergoes renovations, then you will need an updated report if you plan to claim the upgrades).
What is included in a depreciation schedule?
A thorough depreciation schedule covers:
- Capital works (Division 43): the building structure and any qualifying renovations, claimed at 2.5% a year. This is often the largest component of the deduction, particularly for residential properties.
- Plant and equipment (Division 40): removable mechanical and fixed assets, each depreciated over its ATO-set effective life.
- Year-by-year deduction projections: the schedule shows what can be claimed in each year across the full life of the property, so your accountant and financial planner can model the position accurately.
- Scrapping provisions (where applicable): if assets are removed, demolished, or replaced, their remaining undeducted value may be written off in full in the year they are removed. This is particularly relevant during renovations and tenancy changeovers. (Note: for second-hand residential property purchased after 9 May 2017, Division 40 scrapping is restricted. Commercial property is unaffected.)
A TDA depreciation schedule is a 40-year report. It is prepared once and applies for the full depreciable life of the property, subject to updates if you carry out capital works or replace significant assets such as replacing the flooring or changing the carpet.
Division 40 vs Division 43: a quick comparison
| Division 40 | Division 43 | |
| What it covers | Removable plant and equipment | Building structure and capital works |
| Examples | Ovens, carpets, air conditioning, blinds, hot water systems | Walls, roof, flooring substrate, stairwells |
| Claim rate | Effective life of each asset (varies) | 2.5% per year (4% for some buildings and earlier construction) |
| Claim period | Until the asset reaches zero or is disposed of | Up to 40 years from completion of construction |
| Post-2017 restriction | Applies to second-hand residential plant | Not affected |
Who can prepare a depreciation schedule, and why does it need to be a quantity surveyor?
The ATO recognises quantity surveyors (TR 97/25) as appropriately qualified to estimate construction costs where actual costs are not known.
Accountants, valuers, and real estate agents generally are not. This is not a minor distinction: a schedule prepared by someone outside this recognised category may not be defensible in an ATO review.
Quantity surveyors are trained to assess and value construction elements and assets as part of their core discipline.
At TDA, all depreciation schedules are signed off by qualified Quantity Surveyors who ensure you are getting all you’re entitled to.
How long does a depreciation schedule last, and what does it cost?
How long it lasts: a depreciation schedule is valid for the full depreciable life of the property: up to 40 years for Division 43 capital works, plus the effective life of each plant and equipment item under Division 40, often between 5 and 15 years. You don’t need a new schedule each year. You may need an updated schedule if you carry out substantial capital works, replace significant assets, or change the use of the property.
What it costs: at TDA, we offer residential depreciation schedules from $450 plus GST. Commercial properties will require an inspection, and so schedules are priced dependent on size and location. Reports are completed within 3 to 5 business days from receipt of all requested information and inspection completed.
If you need a report faster than our usual turn-around time, you can request a fast-tracked report and have it within 24 hours of payment for a fee.
We also back every residential schedule with the Double Our Fee Guarantee: if we cannot deliver at least double our fee in deductions in the first full financial year, there is no charge for our service. This covers our fee, not the client’s tax outcome. Your individual result depends on your property and your tax circumstances, so make sure you always speak to your accountant first.
Can you claim depreciation on an older or second-hand property?
Yes. This is one of the most common misconceptions among property investors and is often overlooked.
Division 43 capital works are available on residential investment properties where construction commenced after 15 September 1987, claimed at 2.5% a year over 40 years. (Construction between 18 July 1985 and 15 September 1987 is claimed at 4% a year over 25 years.)
For an eligible property, it doesn’t matter how old it is when you buy it: you can claim whatever Division 43 life is left, starting from the day you put a tenant in. Properties built before these dates may still have claims if structural renovations or improvements were completed later.
Division 40 plant and equipment is subject to a restriction introduced on 9 May 2017. Since that date, Division 40 deductions on previously used assets in second-hand residential property are restricted to the original owner or installer. This means if you buy an existing residential investment property after that date, you generally cannot claim depreciation on the plant and equipment that was already there when you bought it.
However, several categories are not affected by this restriction:
- New plant and equipment you install after purchase (new carpets, new air conditioning, new appliances)
- Substantially renovated properties, where the ATO treats the property as effectively new
- Commercial property of all types
- New residential construction
Division 43 capital works are also unaffected by the 2017 change and typically make up the large majority of a residential depreciation claim. For many investors in second-hand properties, the schedule remains well worth commissioning on the strength of Division 43 alone.
If you are unsure whether your property qualifies or to what extent, speak to your accountant. TDA can provide an obligation-free estimate before you commit to a schedule, or you can see it for yourself with our tax depreciation calculator.
Frequently asked questions
Is a depreciation schedule tax deductible? Yes. The cost of preparing a depreciation schedule is generally deductible as a tax-related expense. Speak to your accountant to confirm how this applies to your circumstances.
How quickly can I get a depreciation schedule? Reports are completed within 3 to 5 business days from receipt of all requested information and inspection completed.
Do I need a new depreciation schedule every year? No. A depreciation schedule covers the full depreciable life of the property. You may need an updated schedule if you carry out capital works, replace significant plant, or change the property’s use.
I bought my property several years ago. Can I still get a schedule? Yes. You may also be able to amend previous tax returns, within the ATO’s amendment time limits (generally 2 years for individuals, longer for many other taxpayers), to claim missed deductions. TDA prepares or updates the schedule; your accountant lodges the amendment.
My property was built in the 1990s. Is it still worth getting a schedule? In most cases, yes. Division 43 capital works deductions are available for residential properties where construction commenced after 15 September 1987, for the remaining depreciable life. The ATO recognises quantity surveyors as qualified to assess these values even where the original construction costs are unknown. A preliminary estimate from TDA will give you a clear picture before you commit.
Get a depreciation schedule for your investment property
We’re committed to helping every Australian investor claim all the deductions they’re entitled to. If you own an investment property and haven’t had a depreciation schedule prepared, it’s worth finding out what your property could generate. TDA prepares ATO-compliant tax depreciation schedules for residential and commercial investment properties across Australia.
Call 1300 417 317 or visit tdaqs.com.au to request an obligation-free estimate.
This article is general information only and does not constitute tax or financial advice. Deductions depend on your individual circumstances and property. Speak to your registered tax agent or accountant before making any tax-related decisions
