Depreciation Schedules: The Tax Benefit Most Property Investors Leave on the Table
Property depreciation schedules in Australia 2025: how capital works and plant deductions work, the 2017 rule change, and the tax benefit most investors miss.
Depreciation is the deduction you can claim without spending a cent. Yet many investors never claim it, leaving thousands of dollars in tax benefits on the table every year. It is the most overlooked tool in property investing, and one of the easiest to use.
What depreciation actually is
Depreciation lets you deduct the gradual wear and tear on a building and its fittings against your taxable income.
It is a non-cash deduction. Unlike interest or repairs, you do not pay anything in the year you claim it, which makes it pure tax benefit.
It comes in two parts. Capital works covers the building structure, while plant and equipment covers removable assets like appliances and carpet.
For investors, both reduce taxable income. That can turn a marginal cashflow position into a workable one.
The two types, explained
Capital works deductions apply to the building itself. The structure of an eligible residential property can typically be depreciated at 2.5% a year over 40 years.
Plant and equipment covers the fittings. Items like ovens, air conditioners, blinds, and carpet depreciate over their own shorter effective lives.
The number: Eligible residential buildings can be depreciated at 2.5% a year over 40 years under capital works, a deduction claimed without spending a dollar. Over a year, that alone can run into thousands of dollars for a typical investment property.
Together, they can be substantial. A depreciation schedule prepared by a quantity surveyor lays out exactly what you can claim each year.
The 2017 change every investor should know
The rules tightened in 2017, and many investors still misunderstand the impact.
For established residential properties purchased after May 2017, investors can no longer claim depreciation on previously used plant and equipment.
Capital works survived intact. You can still claim the building structure, and you can still claim new plant and equipment you install yourself.
The change favours newer property. New and substantially renovated homes offer the fullest depreciation benefits, which affects how investors weigh them.
How to claim it properly
The first step is a depreciation schedule. A qualified quantity surveyor inspects the property and prepares a report your accountant uses each year.
The cost is usually modest relative to the benefit. A schedule is a one-off expense that delivers deductions for years, and the fee itself is deductible.
Claim from the start. Many investors miss early years they were entitled to, and amended returns can sometimes recover them.
Keep it current. Renovations and new assets add to what you can claim, so update the schedule when you improve the property.
What investors should ask
Is depreciation worth claiming on an older property? Often yes. Even on older established homes, the capital works deduction on the building structure can be significant, and a quantity surveyor can confirm what is available.
Do I need a quantity surveyor? For a proper schedule, yes. A qualified quantity surveyor's report is the recognised way to substantiate depreciation claims, and the cost is deductible.
How did the 2017 change affect me? If you bought an established property after May 2017, you cannot claim depreciation on existing plant and equipment, only on capital works and new assets you install. New properties are unaffected.
Does depreciation affect my capital gains tax? Yes. Claimed capital works deductions reduce your cost base, which can increase the capital gain on sale. This is general information, not tax advice, so confirm the interaction with your accountant.
The bottom line
Depreciation is the tax benefit hiding in plain sight, a non-cash deduction that can return thousands of dollars a year for the cost of a single quantity surveyor's report. The 2017 changes narrowed it for established properties, but the capital works deduction remains valuable across the board, and new homes still offer the fullest benefit. Too many investors simply never claim it, which is money left on the table every year. Get a schedule, claim from day one, and confirm the detail with your accountant. Clear Yield helps you keep your deductions and records organised, so nothing is missed at tax time.