Depreciation Calculator for Australian Property Investors
Estimate the tax depreciation you can claim on an investment property. Enter the building cost, the year it was built and the value of the fittings, and this free calculator splits your deduction into Division 43 capital works and Division 40 plant and equipment, then projects it forward year by year.
Depreciation is a non-cash deduction, which means it lowers your taxable income without any money leaving your account that year. It is one of the most overlooked ways Australian investors reduce the after-tax cost of holding a property.
Original construction cost (not including land value)
40 years of building depreciation remaining
Carpet, blinds, hot water system, air conditioning, appliances, etc.
first year tax deduction
| Year | Building (Div 43) | Plant & Equipment (Div 40) | Total | Cumulative |
|---|---|---|---|---|
| 1 | $10,000 | $8,000 | $18,000 | $18,000 |
| 2 | $10,000 | $6,400 | $16,400 | $34,400 |
| 3 | $10,000 | $5,120 | $15,120 | $49,520 |
| 4 | $10,000 | $4,096 | $14,096 | $63,616 |
| 5 | $10,000 | $3,277 | $13,277 | $76,893 |
| 6 | $10,000 | $2,621 | $12,621 | $89,514 |
| 7 | $10,000 | $2,097 | $12,097 | $101,611 |
| 8 | $10,000 | $1,678 | $11,678 | $113,289 |
| 9 | $10,000 | $1,342 | $11,342 | $124,631 |
| 10 | $10,000 | $1,074 | $11,074 | $135,705 |
| 11 | $10,000 | $859 | $10,859 | $146,564 |
| 12 | $10,000 | $687 | $10,687 | $157,251 |
| 13 | $10,000 | $550 | $10,550 | $167,801 |
| 14 | $10,000 | $440 | $10,440 | $178,241 |
| 15 | $10,000 | $352 | $10,352 | $188,593 |
| 16 | $10,000 | $281 | $10,281 | $198,874 |
| 17 | $10,000 | $225 | $10,225 | $209,099 |
| 18 | $10,000 | $180 | $10,180 | $219,279 |
| 19 | $10,000 | $144 | $10,144 | $229,424 |
| 20 | $10,000 | $115 | $10,115 | $239,539 |
Division 43 (Capital Works): The building structure itself depreciates at 2.5% per year over 40 years. Only eligible for properties built after September 1987.
Division 40 (Plant & Equipment): Removable assets like carpet, blinds, appliances, and air conditioning. Calculated using the diminishing value method.
Note: These are estimates only. For accurate depreciation claims, you should obtain a tax depreciation schedule from a qualified quantity surveyor. The ATO has specific rules that may affect your eligibility.
How the depreciation calculator works
- 1
Choose new build or existing property
This matters because of the 2017 rules. Investors can claim plant and equipment depreciation on a new property, but generally not on second-hand assets in an established home they buy. The estimate is a guide only, so confirm your plant and equipment eligibility with a quantity surveyor or accountant.
- 2
Enter the building construction cost
Use the original cost of constructing the building only, not the land and not the purchase price. Land does not depreciate. If you do not know the build cost, a quantity surveyor can estimate it.
- 3
Enter the year it was built
Division 43 capital works depreciation applies to residential buildings constructed after 15 September 1987, at 2.5% a year for 40 years. The calculator works out how many years of building depreciation are left.
- 4
Add the plant and equipment value
These are the removable assets: carpet, blinds, the hot water system, air conditioning, ovens and other appliances. They depreciate faster than the building using the diminishing value method.
- 5
Read your deduction and schedule
See your estimated first-year deduction, the five and ten year totals, and a full year-by-year schedule you can use to picture the deduction over time.
A worked Australian example
Say you buy a brand new investment property. The building cost about $400,000 to construct, it was built this year, and the fittings (carpet, blinds, hot water, air conditioning, appliances) are valued at $40,000.
- Building depreciation, Div 43 ($400,000 x 2.5%)
- $10,000
- Plant & equipment, Div 40, year 1 ($40,000 x 20%)
- $8,000
- First-year deduction
- $18,000
- Cumulative deduction over 5 years
- $76,893
- Cumulative deduction over 10 years
- $135,705
In the first year this property generates an estimated $18,000 in depreciation deductions: a flat $10,000 from the building plus $8,000 from the plant and equipment. The building deduction stays at $10,000 a year for 40 years, while the plant and equipment tapers off under the diminishing value method, so the yearly total slowly falls. Across the first five years the deductions add up to about $76,893, and across ten years roughly $135,705. None of that is cash you spend, yet it all reduces your taxable income.
What is property depreciation?
Depreciation is the decline in value of a building and its fittings as they age and wear out. The ATO lets you claim that decline as a tax deduction on an income-producing property, the same way a business depreciates its equipment. It is split into two parts: Division 43 for the building structure, and Division 40 for the plant and equipment inside it.
What makes it powerful is that it is a non-cash deduction. You are not writing a cheque for it each year, but it still reduces your taxable income, which means you pay less tax. For an investor, that lifts your after-tax return without you spending anything extra.
Division 43 versus Division 40
Division 43, capital works, covers the bricks and mortar: the building structure, plus permanently fixed items like the roof, walls and built-in joinery. For residential buildings constructed after 15 September 1987 it is claimed at a flat 2.5% of the construction cost each year, which spreads the deduction evenly across 40 years.
Division 40, plant and equipment, covers the removable and mechanical assets: carpet, blinds, the oven, the hot water system, air conditioning and so on. These have shorter effective lives and are usually claimed using the diminishing value method, so the deduction is largest in the early years and shrinks over time.
The 2017 rule on second-hand assets
Since legislation that took effect from 1 July 2017, investors generally cannot claim Division 40 depreciation on previously used plant and equipment in a second-hand residential property they buy. In plain terms, if you purchase an established home, you usually cannot depreciate the existing carpet, blinds or appliances that came with it.
Division 43 building depreciation is not affected, so you can still claim the 2.5% capital works deduction on an eligible older building. New properties, and assets you buy and install yourself, are also treated differently. The rules are nuanced, so set the property type carefully in the calculator and confirm your eligibility with a qualified quantity surveyor or accountant.
How depreciation fits your wider position
Depreciation reduces your taxable rental income, so it feeds directly into your gearing position. A larger depreciation deduction increases your paper loss on a negatively geared property, which increases the tax you get back at your marginal rate, lowering your real holding cost.
One trade-off worth knowing: the building depreciation you claim under Division 43 reduces your cost base for capital gains tax, so it can lift the taxable gain when you eventually sell. That does not cancel out the benefit, since the deduction is worth more now than the deferred CGT, but it is part of the picture. As always these are estimates, and a quantity surveyor's schedule plus advice from your accountant will give you the figures you can actually lodge.
Frequently asked questions
How much depreciation can I claim on an investment property?
It depends on the building cost, its age and the value of the fittings. A new property with a $400,000 building and $40,000 of fittings might generate around $18,000 in the first year in the worked example above. Older and second-hand properties typically claim less. A quantity surveyor's schedule gives you the figure you can lodge.
Can I claim depreciation on an old property?
Often yes, but usually only the building. If the building was constructed after 15 September 1987 you can claim Division 43 capital works at 2.5% a year. Since the 2017 rules, you generally cannot depreciate the second-hand plant and equipment that came with an established home you bought.
What is the difference between Division 43 and Division 40?
Division 43 is the building structure, claimed at a flat 2.5% a year over 40 years. Division 40 is the removable plant and equipment, such as carpet, blinds, appliances and air conditioning, claimed over shorter effective lives, usually with the diminishing value method so it is highest early on.
Is depreciation a non-cash deduction?
Yes. Unlike loan interest or council rates, you do not pay cash for depreciation each year. It simply reflects the building and fittings wearing out, yet it still reduces your taxable income, which is why it is one of the most valuable deductions an investor can claim.
Do I need a quantity surveyor for a depreciation schedule?
For accurate claims, yes. A qualified quantity surveyor inspects the property and prepares a tax depreciation schedule that the ATO accepts, and their fee is itself tax deductible. This calculator gives an estimate to show you whether a schedule is likely to be worthwhile.
Does claiming depreciation affect capital gains tax?
The Division 43 building depreciation you claim reduces your cost base, which can increase the capital gain that is taxed when you sell. The deduction is generally still worth claiming because the benefit comes earlier, but it is worth discussing the trade-off with your accountant.
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