Property Depreciation Calculator Australia
Property depreciation is a non-cash tax deduction on an investment property. You claim the building at 2.5% a year (Division 43) and removable plant and equipment over its life (Division 40), often $8,000 to $15,000 combined in year one.
Property details
The cost to build the structure only, not the land. A quantity surveyor estimates this if you don't know it (often 50-65% of the purchase price).
Drives the Div 43 rate: 2.5% per year for builds from 16 Sep 1987, 4% for 18 Jul 1985 to 15 Sep 1987. Builds before 18 Jul 1985 cannot claim Div 43.
Plant & equipment (Div 40)
Removable assets: oven, cooktop, carpet, blinds, air-conditioning, hot water system, dishwasher. Usually $15,000-$35,000 for a standard home.
Used for the 9 May 2017 second-hand plant rule. From that date, a buyer cannot claim Div 40 on second-hand plant left by the previous owner.
Div 43 on the building is unaffected either way. This only changes whether you can claim Div 40 on the existing plant & equipment.
Your income
Your salary or other taxable income. Sets the marginal rate the deduction is worth to you.
Your first-year estimate
Estimated tax saving (year 1)
$11,360
From $35,500 of depreciation at your 32% marginal rate.
Worth it? A depreciation schedule costs about $650 once (and is itself tax-deductible). At this estimate it pays for itself in roughly 1 month of tax savings, then keeps deducting for years.
Vestly carries your Div 40 and Div 43 forward every year and rolls it into an ATO-ready tax pack for your accountant.
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Last updated June 2026. Figures based on ATO FY 2025-26 rules (Div 43 capital works rates per TR 97/25, Div 40 plant per the 2017 second-hand rule).
How property depreciation works in Australia
When you own a residential investment property, the building and the assets inside it wear out over time. The Australian Taxation Office (ATO) lets you claim that decline in value as a deduction against your rental income, even though no cash leaves your account in the year you claim it.
There are two separate deductions. Division 43 (capital works) covers the building structure itself, claimed at a flat rate each year. Division 40 (plant and equipment) covers removable, mechanical assets like ovens, carpet, and air-conditioning, each written off over its own effective life.
Because depreciation is a paper deduction, it is often the expense that tips a property into a negatively geared loss on paper while real weekly cashflow stays close to neutral. The dollar benefit is the deduction multiplied by your marginal tax rate, which the calculator above applies using the FY 2025-26 ATO brackets.
Division 43 vs Division 40
The two divisions follow different rules, which is why most properties need both worked out:
- Div 43 (capital works) - the building shell, walls, roof, fixed cabinetry, driveways. Claimed at 2.5% a year for 40 years for builds from 16 Sep 1987 (or 4% over 25 years for 18 Jul 1985 to 15 Sep 1987 builds). The newest deduction band on a renovation starts from the renovation date, not the original build.
- Div 40 (plant & equipment) - oven, cooktop, dishwasher, carpet, blinds, air-conditioning, hot water system. Each asset depreciates over its own ATO effective life. Since 9 May 2017, second-hand plant in a property you bought used is no longer claimable; new assets you install are.
Worked example
Example
The Nguyen household buys a brand-new $620,000 townhouse in 2024 with a build cost of about $400,000 and roughly $30,000 of plant and equipment. Because the property is new, both divisions are claimable in full. Div 43 is 2.5% of $400,000 = $10,000 a year, and the Div 40 fit-out adds around $7,000 in the first year, for a total of about $17,000. On a $135,000 income (37% marginal rate including Medicare), that is roughly $6,500 back in the first year. A $650 quantity surveyor schedule pays for itself in about five weeks.
FY 2025-26 depreciation rates and treatment
| Deduction | Applies to | Rate / treatment |
|---|---|---|
| Div 43 (standard) | Residential built from 16 Sep 1987 | 2.5% per year for 40 years |
| Div 43 (transitional) | Residential built 18 Jul 1985 - 15 Sep 1987 | 4% per year for 25 years |
| Div 43 (pre-1985) | Residential built before 18 Jul 1985 | Not deductible (building) |
| Div 40 (new) | New property, or assets you install yourself | Each asset over its ATO effective life |
| Div 40 (second-hand) | Used property bought on/after 9 May 2017 | Not deductible (existing plant) |
Div 43 deductions reduce your CGT cost base when you sell (ITAA 1997 s.110-45). Source: ATO - Capital works deductions →
Do I need a depreciation schedule, and is it worth it?
A depreciation schedule is a one-off report from a qualified quantity surveyor that lists every claimable Div 40 and Div 43 amount, year by year, for the life of the property. It typically costs $600 to $700, is fully tax-deductible itself, and only needs to be prepared once.
For almost any investment property built or renovated in the last few decades, it is worth it. If the schedule surfaces $8,000 to $10,000 of first-year deductions, a mid-bracket investor recovers the fee in the first month or two and keeps claiming for years. The main exceptions are very old, never-renovated properties bought second-hand, where both Div 43 and the post-2017 Div 40 rules leave little to claim.
Common questions
What's the difference between Div 40 and Div 43 depreciation?
Division 43 is capital works: the building structure itself plus fixed items like walls, roofing, and built-in cupboards. It is claimed at 2.5% a year over 40 years. Division 40 is plant and equipment: removable, mechanical assets such as the oven, carpet, blinds, and air-conditioning, each written off over its own effective life. Most investors claim both.
Can I claim depreciation on an old property?
Often yes, but it depends. The building (Div 43) only qualifies if construction was completed after 17 July 1985, and even then capital works runs for 40 years from completion, so a 1990s build still has years left. Plant and equipment (Div 40) on a second-hand home bought from 9 May 2017 cannot be claimed, but any new assets you install yourself can be.
Is a depreciation schedule worth it?
For most investment properties, yes. A quantity surveyor schedule costs roughly $600 to $700 once and is itself tax-deductible. If it uncovers even $5,000 of annual deductions, a 37% marginal rate investor saves about $1,850 in the first year alone, so the schedule typically pays for itself within months and keeps deducting for years afterward.
Do I need a depreciation schedule to claim depreciation?
To claim Div 43 capital works on a building where you do not know the original construction cost, the ATO effectively requires a quantity surveyor estimate, since only a qualified QS can estimate historical build costs. You can claim Div 40 plant from supplier invoices for assets you bought, but a schedule is the defensible way to maximise and substantiate the full claim.
How much depreciation can I claim on an investment property?
It varies with the building cost, age, and fit-out, but a newer residential property commonly produces $8,000 to $15,000 of combined Div 40 and Div 43 deductions in the first full year, tapering over time. A 2.5% Div 43 rate on a $400,000 build alone is $10,000 a year. Older or second-hand properties claim less, especially after the 2017 plant rule.
Does depreciation affect my capital gains tax when I sell?
Yes. Div 43 capital works deductions you claim during ownership reduce your CGT cost base under ITAA 1997 s.110-45, which increases the taxable gain when you sell. Depreciation effectively defers tax rather than erasing it, but the deferral is still valuable because you get the cash benefit now and the 50% CGT discount can soften the gain later.
Is depreciation a real cash deduction?
It is a non-cash deduction, which is what makes it powerful. You do not spend any money in the year you claim it, yet it reduces your taxable income just like a cash expense. That is why depreciation often pushes a property into a negatively geared paper loss while real weekly cashflow stays close to neutral.
What is the 2017 second-hand plant and equipment rule?
From the 2017 Federal Budget, residential property contracts dated on or after 9 May 2017 can no longer claim Div 40 on second-hand plant and equipment left by a previous owner (s.40-27 ITAA 1997). The change does not affect Div 43 capital works at all, and brand-new properties plus assets you install yourself are still fully claimable.
Is this calculator tax advice?
No. It is an estimate using current ATO FY 2025-26 rules to show the scale of a potential deduction. The defensible figure for your tax return comes from a registered quantity surveyor schedule and a registered tax agent. Always confirm before you lodge.
Related calculators
- Negative gearing calculator - how depreciation feeds your yearly tax saving
- Property cashflow calculator - your real weekly position after the deduction
- CGT calculator - why Div 43 claimed now lifts your gain later
- Tax deductions by state - every deductible expense, federal plus your state
Keep your depreciation working all year
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