Two streams of ATO depreciation you can claim against rent: Division 43 (capital works — the building itself, 2.5% straight-line for 40 years if built after 1987) and Division 40 (plant & equipment — fixtures, appliances, blinds, carpets, on a diminishing-value schedule).
This is a ballpark — the ATO requires a registered Quantity Surveyor's report for actual claims. Cost: $400–700, fully deductible. Pays for itself in the first year of claims on most properties built after 1987. If you've held an investment property and never claimed Div 43, you can backdate up to two prior tax years.
Tax depreciation is the ATO's recognition that buildings and fixtures lose value over time. For investment property owners, this means you can claim a deduction against rental income without spending a dollar — the depreciation lowers your taxable income, generating a tax refund at your marginal rate.
For a typical investment property, depreciation can deliver $3,000–$10,000 in deductions per year, depending on age, construction value, and what's in the dwelling. At a 37% marginal tax rate, that's $1,100–$3,700 in actual tax saving.
The building itself depreciates at 2.5% per year, straight-line, over 40 years from construction. Available for buildings constructed after 17 September 1987. The deduction is based on the ORIGINAL construction cost, not the property's purchase price — land excluded.
If you don't know the original build cost, a Quantity Surveyor can estimate it. For metro suburbs, build cost typically runs 35–45% of the total purchase price (the rest is land). A rough rule: $700,000 metro purchase ≈ $280,000 build cost ≈ $7,000/year Div 43 deduction.
Removable items like ovens, dishwashers, blinds, carpets, hot water systems, air conditioning. These depreciate on a diminishing-value basis over their effective life (typically 5–15 years). Year 1 claim is the largest; subsequent years decline.
For new properties, Div 40 can deliver $4,000+ in year 1. For existing properties purchased after 9 May 2017, Div 40 is restricted to assets YOU install yourself — second-hand plant from the previous owner doesn't qualify. New builds get the full benefit.
The ATO requires a registered Quantity Surveyor (QS) to provide a depreciation schedule for buildings where the original construction date is post-1987 and original cost isn't directly known. Major QS firms include BMT, Washington Brown, and Depreciator.
A QS report costs $400–$700 and is fully tax-deductible. It typically pays for itself in tax savings within the first year of claims. The report is reusable across the entire ownership of the property.
If you've owned an investment property and never claimed depreciation, you can amend up to two prior tax years. The QS report will retroactively calculate what you could have claimed. Many investors discover $5,000–$15,000 in missed deductions on their first QS engagement.