Calculator
Tax Depreciation (Residential)
Indicative first-year depreciation deductions for a residential investment property — Div 43 capital works + Div 40 plant & equipment.
Year-1 deduction (indicative)
$15,400
Combined Div 43 + Div 40
Capital works (Div 43)
$7,000
2.5% of construction cost p.a.
Plant & equipment (Div 40)
$8,400
Diminishing value approx — Year 1
Estimated tax refund
$5,698
At 37% marginal rate
General information only. Calculations are indicative, based on simplified rules current at FY2024–25, and exclude items such as foreign buyer surcharges, off-the-plan concessions, principal-place-of-residence rules and lender policy variation. Always verify with your accountant, broker and the relevant State Revenue Office calculator before transacting.
About this calculator
Tax Depreciation Calculator (Australia)
Depreciation is the single largest non-cash deduction most Australian property investors claim, yet it's the one most commonly under-utilised. The ATO splits depreciation into two parts: Division 43 capital works (the structure itself, depreciated at 2.5% per year over 40 years) and Division 40 plant & equipment (carpets, ovens, blinds, hot water systems — items with a shorter effective life). Since the May 2017 changes, plant & equipment deductions on second-hand residential property are restricted to original purchasers and new builds. This calculator estimates first-year and cumulative deductions on those rules.
When to use it
- Comparing new-build vs established property after-tax cashflow
- Forecasting after-tax yield on a potential acquisition
- Sizing the value of commissioning a full Quantity Surveyor schedule
- Modelling the depreciation cliff at end of Division 43's 40-year life
How to use it
- 1
Enter property construction cost
For Division 43 you need the actual original construction cost, not the purchase price. A Quantity Surveyor estimates this when invoices aren't available.
- 2
Enter plant & equipment value
For new builds this is the developer's allocation. For second-hand stock you generally can't claim, unless you've added new items yourself.
- 3
Set property age
Buildings constructed before 16 September 1987 are not eligible for Division 43 capital works deductions.
- 4
Choose new vs established
New properties unlock both Div 40 and Div 43. Established properties are limited to Div 43 only (for post-1987 buildings).
- 5
Read first-year deduction
Multiply by your marginal tax rate to estimate the cash tax refund. A $10k deduction at 39% MTR returns $3,900 in cash.
Methodology & assumptions
Division 43 (capital works) is calculated at 2.5% straight-line on the original construction cost for residential buildings constructed after 15 September 1987.
Division 40 (plant & equipment) uses the diminishing value method as the default and combines new-build pooled assets with low-value pooling rules where applicable.
Post-9 May 2017 changes apply: second-hand plant & equipment in residential property is not deductible to subsequent purchasers but remains in the cost base for CGT.
Renovations and capital improvements you fund yourself reset their own depreciation schedule from the date the asset is first installed and ready for use.
Common pitfalls we see
- Claiming Division 40 on second-hand residential property — disallowed since 2017 unless you funded the improvement.
- Forgetting that depreciation reduces your CGT cost base. Today's cash benefit becomes tomorrow's higher capital gain on sale.
- Not commissioning a Quantity Surveyor report. The $700–800 fee is fully deductible and typically uncovers $5k–15k of first-year deductions.
- Assuming all properties qualify. Pre-1987 buildings lose Division 43 entirely.
Frequently asked questions
What is property tax depreciation?
Depreciation is a non-cash deduction claimed against rental income for the gradual wear and tear of a building (Division 43) and its plant & equipment (Division 40). It's recognised by the ATO and requires no cash outlay each year.
Can I claim depreciation on a second-hand property?
You can still claim Division 43 capital works on buildings constructed after 15 September 1987. You cannot claim Division 40 on pre-existing plant & equipment unless you funded the improvement yourself.
Do I need a Quantity Surveyor report?
For any property where construction costs aren't directly known, yes. The QS report is the ATO-acceptable evidence base and the fee is fully deductible in the year incurred.
How long does depreciation last?
Division 43 runs for 40 years from completion. Division 40 items run for each asset's effective life — typically 4–15 years for residential plant & equipment.