What is property Depreciation?

The Tax Office states that if you are the owner of an investment property, you are eligible to claim back two types of allowances on your property: Capital Works deductions and depreciation on Plant and Equipment for residential properties constructed after 1985.

Capital works deductions

If a property was built after 1985, you can claim depreciation for the years remaining before the property is 40 years old. So, depreciation tax breaks on a property built in 1990 will run out until 2030. The deduction is 2.5% of the cost of building in 1990 (when building commenced), not the current cost.

Plant & equipment

For property investors, plant and equipment are items like ovens, furniture & carpets that are replaceable as they wear out. The tax office lists all items you can claim on and for how long. Known as “The Effective Life”, this is how long they say an item will last before it needs replacement.

For example, a carpet’s life is 10, a kitchen stove is 12 and furniture 13.3 years.

Can’t my accountant just do it?

The problem is that accountants don’t have the skills recognized by the ATO to estimate what a property might have cost to build, or renovate. The people best qualified to that are quantity surveyors.

Can I claim renovations completed by the previous owner?

Any modification to the property that occurred in a previous renovation can be included. For capital improvements to be eligible for capital works deductions, construction must have commenced within the qualifying dates which are after the 18th of July 1985 for residential and after the 20th of July 1982 for commercial buildings.

What about Depreciation previously unclaimed?

Previous tax returns can be adjusted when a property owner has not been claiming depreciation. The previous two financial year tax returns can generally be adjusted and amended.


This information is provided as an informational service only and therefore does not constitute financial advice and should not be relied upon as financial product advice.