🏗️ The "Invisible" Tax Deduction
You claim the mortgage interest. You claim the council rates. You claim the property manager fees.
But are you claiming the wear and tear of the building itself?
Many investors ignore this because it is a "Non-Cash Deduction." You don't spend money from your bank account, yet the ATO allows you to reduce your taxable income by thousands.
A client of mine bought a 1990s unit. He thought it was too old to claim anything. A Quantity Surveyor (QS) found $4,000 of deductions in the first year alone. That resulted in a significant tax refund. The report cost approx. $800 (and was fully tax-deductible). That is an instant, guaranteed ROI.
In Australia, property depreciation is split into two categories. You need to understand the difference to know if you qualify.
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| You Are Still Missing $5,000 in Tax Deductions |
Division 40 vs. Division 43
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Division 40: Plant and Equipment
• What is it? Items that can be easily "removed" from the house. (Carpets, Blinds, Ovens, Air Conditioners, Hot Water Systems).
• The Rule: Since the 2017 legislation change, you can only claim depreciation on these items if you bought the property brand new or if you installed the items yourself. If you bought a second-hand house, you cannot claim the existing carpet. -
Division 43: Capital Works
• What is it? The structure itself. (Bricks, Concrete, Roof, Cabinets, Tiling).
• The Rule: You can claim 2.5% per year for 40 years from the date of construction.
• The Opportunity: This applies to ANY residential building built after September 1987. Even if you bought it yesterday, if it was built in 1998, you can still claim the remaining years of structural life. PLUS, any major renovations done by previous owners may also be claimable!
Why You Need a Quantity Surveyor
Accountants are generally not qualified to estimate construction costs. Only a qualified Quantity Surveyor (QS) can legally estimate the historical cost of a building if the original receipts are missing.
They will visit your property (or perform a comprehensive desktop assessment), measure the rooms, count the assets, and produce a "Tax Depreciation Schedule."
This is a 40-year spreadsheet. You just hand it to your accountant once, and they use it every year for the life of your investment.
The "Scrapping" Bonus
Planning a renovation? Stop! Order the schedule BEFORE you demolish the old kitchen or bathroom.
If you throw away an old kitchen that still has a "residual value" of $3,000 on the depreciation schedule, you can write off that entire $3,000 as an instant tax deduction in the current financial year. This is called "Scrapping." If you demo it before the QS inspects or documents it, that tax credit is gone forever.
🛡️ Chief Editor’s Verdict
It's the only receipt you don't have to pay for (because the tax savings usually cover the cost).
- Order It Now: Reputable firms like BMT, Washington Brown, or Duo Tax specialize in this. In 2026, expect to pay $750-$950, which is 100% tax-deductible.
- Backdate It: If you've owned the property for 2 years and never claimed, your accountant can amend your previous 2 years' tax returns to get you a refund check.
Don't leave free money on the table.
The information provided in this article is for general educational purposes only and does not constitute professional tax or financial advice. Tax laws regarding property depreciation (Division 40 and 43) are complex and subject to change by the Australian Taxation Office (ATO). You should consult with a Registered Tax Agent or a qualified Quantity Surveyor to determine your specific eligibility and potential deductions. All figures mentioned are estimates based on market conditions as of January 2026.
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