Most people hear the word “depreciation” and think it’s a bad thing. After all, in everyday life, depreciation means losing value—like when your car drops in price the moment you drive it off the lot. But for property investors in Australia, depreciation is actually a huge advantage.

🤔What is Depreciation, Really?

In simple terms, depreciation is the ATO’s way of recognizing that properties wear out over time—and they let you claim that wear and tear as a tax deduction. This means:

✅ Less tax to pay

✅ More money in your pocket

✅ Better cash flow to reinvest or cover expenses

How Does It Work?

Think of it like this: if you own an investment property, certain parts of it lose value each year—the walls, the carpets, the kitchen appliances. The Australian Taxation Office (ATO) lets you claim this loss as a tax deduction.

There are two main types of depreciation:

1. Building Depreciation (Capital Works – Division 43)

• Covers the structure of the property (e.g., walls, roof, built-in cupboards).

• Available for properties built after 16 September 1987.

• Can be claimed at 2.5% per year for 40 years.

2. Fixtures & Fittings Depreciation (Plant & Equipment – Division 40)

• Covers removable items (e.g., dishwashers, carpets, blinds, air-conditioning).

• Each item has a set “lifespan” determined by the ATO.

• Even second-hand properties may qualify for some deductions.

Why is This Good for You?

Let’s say you buy a rental property for $500,000. With a depreciation schedule in place, you could claim $10,000+ per year in deductions—reducing your taxable income and saving you thousands in taxes.

Fun fact 😀

Properties featured in The Block 2024 were estimated to offer $4.4M–$5.2M in depreciation deductions—sometimes more than their asking price! (couriermail.com.au)

How Can You Start Claiming Depreciation?

✔ Hire a Quantity Surveyor – They’ll create a depreciation schedule outlining what you can claim.

✔ Talk to Your Accountant – Ensure you maximize deductions on your tax return.

If you’re considering getting a depreciation schedule for your property, use this link to receive a $150 discount on your report:  👉CLICK HERE 

At Value Buyers, we help property investors make smarter, more profitable decisions. We believe depreciation is a tax benefit that can improve cash flow, but it should not be the primary motivation for investing in property. When used strategically, it can help reduce taxable income during ownership. However, upon selling the property, the depreciation claimed over the years is added back as “depreciation recapture,” which increases the taxable capital gain. This means you may have to pay more in Capital Gains Tax (CGT) due to the depreciation deductions previously claimed.

Therefore, property investment decisions should be made by considering overall circumstances and long-term goals rather than focusing on a single factor. Our team at Value Buyers is here to help you make informed decisions and grow your wealth strategically.