Property Depreciation Schedules Explained
Property depreciation schedules — capital works vs plant and equipment, the post-2017 second-hand rule, and why a quantity surveyor report usually pays for itself.
Depreciation is the ATO's acknowledgment that buildings and everything in them slowly wear out, and that this counts as a cost of earning your rent. You claim it every year and no cash leaves your pocket — it's a paper deduction that shrinks your taxable income without shrinking your bank balance. Many landlords never claim it simply because they don't know it exists.
The map to it all is a document called a depreciation schedule. Here's how it works, the two kinds of depreciation inside it, and the 2017 rule change that trips up second-hand buyers.
Capital works: the building itself, on a 40-year drip
Capital works covers the structure and everything bolted to it — walls, roof, driveway, kitchen cupboards, tiling.
For most residential rentals, the construction cost is claimed at 2.5% per year over 40 years from when the building was built. A property that cost $300,000 to construct can generate around $7,500 a year in deductions, for decades.
The catch is the start date: the 40-year clock runs from construction, not from when you bought. Buy a 15-year-old house and about 25 years of claims remain. Buildings from before the scheme's 1980s cut-off may have nothing left on the structure — though later renovations get their own fresh clock.
Plant and equipment: the stuff that dies faster
Plant and equipment covers the removable items: ovens, dishwashers, air conditioners, carpets, blinds, hot water systems. Each has its own 'effective life' set by the ATO — a lifespan estimate, like a use-by date for appliances — and depreciates on its own schedule.
These wear out faster than bricks, so the deductions are front-loaded: a new air conditioner or carpet delivers its biggest claims in the first few years. That's why brand-new properties produce such strong early depreciation.
Capital works is a slow 40-year drip; plant and equipment is a series of short, fast pours. A good schedule captures both.
The 2017 rule that changed the game for second-hand buyers
If you bought a second-hand residential property after May 2017, you generally can't claim depreciation on the plant and equipment that came with it — the previous owner's used oven, carpet and ageing air conditioner are off the menu.
The government decided used appliances shouldn't generate fresh deductions every time a property changes hands, so second-hand buyers now claim noticeably less than a decade ago.
But capital works at 2.5% a year is untouched — the building still depreciates no matter how many owners it's had. And anything you buy new yourself, like a replacement dishwasher or new blinds, is fully claimable from day one.
⚠️The trap
Assuming the 2017 rule killed depreciation on second-hand properties entirely. It didn't — capital works often remains worth thousands a year. The rule only removed the previous owner's plant and equipment from your claim.
The report that finds the money
You can't guess these numbers on your tax return. You need a depreciation schedule prepared by a quantity surveyor — a specialist qualified to estimate construction costs and value everything in a building. They assess the property once and produce a year-by-year table of every claimable dollar, typically covering decades.
A residential schedule commonly costs around $400 to $800 depending on the property and provider, and the fee is itself tax deductible. Several firms even guarantee it: if they can't find deductions worth a multiple of their fee in the first year, the report is free.
The arithmetic: if the schedule uncovers $8,000 of first-year deductions and your marginal rate (the rate on your top dollar of income) is 30% plus the 2% Medicare levy, that's about $2,560 back — from a report that cost maybe $700. And it keeps paying every year after.
💡Quick win
Order the schedule once, use it for decades. If you've owned a rental for years without one, ask a tax professional about amending recent returns — you can often claw back missed deductions.
FAQ
Is a depreciation schedule worth it for an older property?
Usually worth checking. Even older buildings often have claimable capital works from renovations — a previous owner's new kitchen or extension starts its own 40-year clock. Most quantity surveyors will say upfront if a property isn't worth a report, since many guarantee their fee against the deductions found.
Can I claim depreciation on a second-hand property bought after May 2017?
Yes, with one carve-out. Capital works — the building structure — remains fully claimable at 2.5% a year. What you can't claim is the second-hand plant and equipment that came with the purchase, like the previous owner's appliances and carpets. Anything you buy new yourself is claimable as normal.
How much does a depreciation schedule cost?
Residential schedules commonly run around $400 to $800 depending on the provider and property. The fee is tax deductible, and the schedule typically covers the remaining life of the property — a one-off cost for decades of claims.
Run your own numbers
Sources: figures checked against ATO published rates and thresholds for FY2025-26 at the review date. See how we check our numbers.
⚠️ General information only — not tax or financial advice. Figures relate to FY2025-26 unless stated otherwise.