One of the most common questions we hear is whether an older investment property is still worth a depreciation schedule. Usually yes — but what you can claim depends on when the property was built and when you bought it.
The two types of deduction
- Division 43 — Capital Works. The building structure: walls, floors, roof, plumbing, wiring and fixed items. Claimed at 2.5% per year over 40 years.
- Division 40 — Plant & Equipment. Removable and mechanical assets: carpets, blinds, ovens, air conditioning, hot water systems. Depreciated over each asset's effective life.
Property age affects these two very differently, which is where the confusion arises.
The 2017 rule change
If you contracted to purchase a second-hand residential property after 7:30 pm on 9 May 2017, you can generally no longer claim depreciation on the previously used plant and equipment that came with it. The previous owner's oven, carpets and air conditioner are no longer deductible for you — the biggest change to residential depreciation in decades.
What it did not affect
- Division 43 capital works — still fully claimable regardless of previous ownership
- Properties purchased before 9 May 2017 — grandfathered under the old rules
- Brand new properties — first owners claim both divisions in full
- Commercial property — unaffected entirely
- Assets you buy yourself — a new dishwasher or carpet you install is your asset and is claimable
What you can claim on an established property
For an established residential property bought after May 2017, a schedule will typically capture:
- Full Division 43 capital works on the original construction
- Capital works on structural renovations by previous owners, even decades old
- Plant and equipment you have purchased and installed yourself
- Qualifying capital works and assets from any renovation you undertake
Previous owners' renovations are the most commonly overlooked component. A kitchen refit done in 2010 by a former owner still carries Division 43 value — but only if it is identified and costed properly.
Does the construction date matter?
Yes. Division 43 applies to residential buildings where construction commenced after 18 July 1985. If the original building predates that, the original structure attracts no capital works claim.
That doesn't make the property a lost cause. Renovations and extensions are assessed on their own construction dates — so a Victorian-era terrace renovated in the 1990s and again in 2015 may still hold substantial claimable value.
New builds: the strongest position
As the first owner of a brand new property, both divisions are available in full. Plant and equipment is at its highest value in a new build, which usually means larger deductions in the early years of ownership.
The practical takeaway
Property age changes what you claim, not whether you should claim. Assuming an older property has nothing worth claiming is one of the most expensive misconceptions in property investment. Renovation history, structural improvements and your own asset purchases all add up. The only way to know is to have a qualified Quantity Surveyor assess the property against the applicable rules and dates.
The interaction between construction dates, renovation history and purchase timing is rarely straightforward. Get in touch with Melbourne Tax Depreciation for an obligation-free assessment.
Disclaimer: This article is general information only and is not tax, legal or financial advice. Depreciation entitlements depend on your individual circumstances. Please seek advice specific to your situation.