Depreciation Schedule Australia: Why Property Investors Should Get One Done Properly

Depreciation is one of the few tax benefits available to property investors that doesn't require spending extra money to claim. It reflects the natural wear and decline in value of a building and its fixtures over time, and the Australian Tax Office allows investors to claim this as a deduction.

Despite being one of the more valuable deductions available, depreciation is also one of the most commonly missed or underclaimed, largely because investors either don't know it exists or try to estimate it themselves instead of getting a proper schedule done.

What A Depreciation Schedule Is

A depreciation schedule is a formal report, usually prepared by a qualified quantity surveyor, that itemises the building structure and its fixtures and calculates how much can be claimed as a tax deduction each year.

It typically covers the full useful life of the assets involved, so a schedule prepared once can be used for many years of tax returns, with your accountant applying the relevant figures each year.

The Two Types Of Deduction

Depreciation claims generally fall into two categories, and understanding the difference helps explain why professional schedules matter so much.

Capital works deductions apply to the structural elements of the building, like walls, roofing, and built-in kitchens, and are claimed over a long timeframe. Plant and equipment deductions apply to removable items like appliances, carpets, and blinds, which depreciate faster.

• Capital works: structural elements, generally claimed over up to 40 years
• Plant and equipment: appliances, carpets, blinds, hot water systems
• Common area assets for units in a strata or owners corporation scheme
• Renovation costs from previous owners, where evidence is available
• Landscaping and outdoor structures like fencing or decking

Why DIY Estimates Usually Fall Short

Some investors try to estimate depreciation themselves or rely on their accountant to guess figures without a site inspection. This almost always results in a lower claim than what's legitimately available, because accurately valuing embedded assets requires specific construction cost knowledge.

A quantity surveyor is trained to identify and value items that a non-specialist would miss entirely, from the value of built-in wardrobes to the classification of common property assets in a unit block.

New Versus Established Properties

Rules around plant and equipment depreciation changed in 2017 for established residential properties, limiting new owners from claiming depreciation on previously used plant and equipment items unless they were the first to use them.

This makes the type of property you buy relevant to how much depreciation benefit you can realistically expect. New builds and substantially renovated properties generally offer stronger depreciation outcomes than older established homes bought second-hand.

• New builds: full depreciation benefits typically available on all eligible assets
• Substantially renovated properties: may qualify depending on renovation scope
• Older established homes: capital works deductions still apply where age permits
• Off-the-plan purchases: often marketed with depreciation benefits highlighted
• Always confirm eligibility with a quantity surveyor before assuming a figure

Cost Versus Benefit

A professional depreciation schedule typically costs a few hundred dollars and is itself tax deductible. For most investment properties, the deductions it unlocks over the following years far outweigh that upfront cost.

Talk to your accountant about timing the schedule, ideally soon after settlement, so you can start claiming from your very first tax return rather than missing a year of eligible deductions.

Final Word

A depreciation schedule is one of the simplest ways to improve the after-tax return on an investment property, and it costs very little relative to what it can return over the life of the asset.

Speak to a qualified quantity surveyor and your accountant early, ideally before your first tax return after purchase, to make sure you're not leaving legitimate deductions on the table.