Frequently Asked Questions

A Tax Depreciation Schedule (also called a Depreciation Report or Quantity Surveyor's Report) is a document prepared by a qualified Quantity Surveyor that itemises all the tax deductions available to an investment property owner under two categories:

• Division 40 – Plant & Equipment: Depreciable assets such as carpets, appliances, air conditioners, blinds and hot water systems.
• Division 43 – Capital Works: The building structure itself and permanently fixed items, deducted at 2.5% per year over 40 years.

The schedule is used by your accountant each year when lodging your tax return. It covers your property for its full 40-year claimable life and requires no annual renewal.

Any owner of an income-producing (investment) property in Australia may be eligible. This includes owners of residential, commercial, retail and industrial properties. The key requirements are:

• The property must be rented or available for rent (generating assessable income)
• For Division 43 (building write-off), the property must have been constructed after 18 July 1985
• You must be the legal owner of the property during the period you claim

Properties held in trusts, SMSFs or by companies may also be eligible — consult your accountant regarding your specific ownership structure.

A qualified Quantity Surveyor is required. The ATO specifically states that construction cost estimates for Division 43 purposes must be prepared by a person with appropriate qualifications — and Quantity Surveyors are the recognised professionals for this purpose.

Your accountant cannot prepare these estimates themselves. They rely on the Quantity Surveyor's schedule to apply the correct deductions to your return. Melbourne Tax Depreciation's principal, Erik Abbenhuys, holds QS Registration QS-1009 with the Building & Plumbing Commission and is a Member of the Australian Institute of Quantity Surveyors (MAIQS).

Division 43 – Capital Works covers the building structure and permanently fixed items. For eligible properties, the deduction is 2.5% per year of the original construction cost, for up to 40 years. It applies to the building itself — walls, floors, roof, plumbing and wiring.

Division 40 – Plant & Equipment covers individual removable or mechanical assets. Each asset has its own effective life (set by the ATO), and is depreciated using either the Prime Cost or Diminishing Value method over that life. Common items include carpets, blinds, dishwashers, air conditioners, and hot water systems.

Your MTD schedule covers both categories and clearly separates them for your accountant.

It depends on when the property was constructed. The Division 43 building write-off is only available for properties built after 18 July 1985. If your property was built before that date, Division 43 cannot be claimed.

However, Division 40 deductions may still be available on new plant and equipment items you install (e.g. a new air conditioner, new carpet, new appliances), regardless of when the building was built. Contact MTD for an assessment of your specific property.

Yes. Commercial, retail and industrial properties are fully eligible for both Division 40 and Division 43 deductions. The 2017 budget changes that restricted plant and equipment claims on second-hand residential properties do not apply to non-residential property.

Some commercial building types may also attract a higher Division 43 rate of 4% per year (rather than 2.5%), depending on their use and construction date. MTD prepares depreciation schedules for all property types.

Yes — and depreciation is particularly valuable for negatively geared properties. Because depreciation is a non-cash deduction (you don't actually spend the money), it increases your tax loss without any real cash outflow. This further reduces your overall tax liability and improves the after-tax cash return on your investment.

It is never too late to obtain a Tax Depreciation Schedule. There is no rule preventing you from getting one for a property you have held for many years. Your accountant may also be able to amend prior year tax returns to claim missed deductions, subject to the ATO's amendment time limits — generally two years for individuals from the date the original assessment was issued.

Contact MTD for a free assessment. We will advise exactly what deductions are available and how far back they can be claimed.

From 1 July 2017, investors who purchase a second-hand residential property can no longer claim Division 40 (plant and equipment) depreciation on pre-existing assets in the property. Previously, all investors could claim depreciation on items like carpets and appliances regardless of whether they were new or not.

The changes do not affect:

• Properties purchased before 9 May 2017 (contracts exchanged before that date are grandfathered)
• Division 43 (building write-off) deductions — these are fully unaffected
• New plant and equipment items you install yourself after purchase
• New residential construction (off-the-plan or newly built properties)
• Commercial, retail and industrial properties

Yes, in most cases. The Division 43 building write-off — which is not affected by the 2017 changes — alone can be worth $3,000–$10,000+ per year for a residential property constructed after 1985, depending on its size and construction cost.

Additionally, any new plant and equipment items you install during your ownership (new carpet, new air conditioner, new appliances, etc.) can still be depreciated. Over a typical holding period, these add up significantly.

Contact MTD for a free assessment — we'll tell you honestly whether a schedule is worthwhile for your specific property.

Yes. Division 43 deductions reduce the cost base of your property for CGT purposes, which means the calculated capital gain is higher when you sell. However, in the vast majority of cases the cumulative tax savings from depreciation over your holding period significantly outweigh any additional CGT payable on sale — particularly when the 50% CGT discount applies (for properties held more than 12 months).

Importantly, not claiming depreciation does not protect your cost base. The ATO can still require a reduction for amounts you were entitled to claim but didn't. This is a common misconception. Always claim your depreciation and let the numbers work in your favour.

See our detailed article on depreciation and CGT for a worked example.

If you have owned an eligible investment property and never had a depreciation schedule prepared, you should arrange one as early as possible — well before you sell. Prior year tax returns may be amended to access missed deductions (within the ATO's time limits), and your accountant will need accurate depreciation records to correctly calculate your CGT position.

If you already have a schedule, ensure your accountant has a complete record of all depreciation claimed year by year, as this information is required to calculate the cost base reduction when you sell.

The cost varies depending on property type and size. Contact us for a free, no-obligation quote. In most cases the first year's tax saving alone substantially exceeds the schedule fee — and the fee is itself a tax-deductible expense as a cost of managing your investment property.

The schedule covers 40 years of deductions with no renewal cost, so you only pay once.

To get started, we typically need:

• Property address
• Date of settlement / purchase
• Purchase price (and Contract of Sale if available)
• Approximate year of construction (building plans if available)
• Details of any renovations or improvements

Where documentation is unavailable, Erik uses his extensive experience to estimate construction costs from industry records and comparable projects. You don't need to have every document before reaching out — we'll guide you through what's needed.

A physical inspection is the preferred approach for properties where Division 40 (plant and equipment) items are claimable, as it allows accurate identification and valuation of all assets. For properties where only a Division 43 building write-off applies (e.g. second-hand residential properties purchased after May 2017), a desk-based assessment using plans and documentation may be sufficient. Contact us to discuss the most appropriate approach for your property.

In most cases, completed schedules are delivered within 5–10 business days of inspection or receipt of all required documentation. If you have an urgent deadline (e.g. an imminent tax return lodgement), please let us know and we will do our best to accommodate you.

Renovations and capital improvements create new depreciation entitlements that are not in your original schedule. If you carry out significant works — a kitchen or bathroom renovation, new flooring, new plant items, an extension, a deck — contact MTD when the works are complete and we will prepare an amendment to capture the additional deductions.

Yes. MTD schedules are specifically designed to be handed directly to your accountant or tax agent. Each schedule includes a clear year-by-year summary of all deductions, itemised asset listings with depreciation methods, and the relevant Division 43 rate. Your accountant can read off the current year's figures and apply them to your return without any additional calculation.

We are also happy to liaise with your accountant directly if they have any questions about the schedule.

Melbourne Tax Depreciation services properties across Victoria, with a primary focus on Melbourne's CBD, inner suburbs, Eastern Suburbs, and the Geelong region. If your property is in a regional or outer area, contact us and we will advise whether an inspection can be arranged or whether a desktop assessment is suitable.