Helping clients make the most from their investment
Helping clients make the most from their investment
If you own a rental property in Melbourne, tax depreciation represents one of your most valuable—yet often overlooked—investment deductions. A professionally prepared residential tax depreciation schedule can deliver thousands of dollars in annual tax savings, significantly improving your property’s cash flow without requiring any additional expenditure.
At Costin Quantity Surveyors, we specialize in maximizing tax depreciation deductions for Melbourne residential investment properties including apartments, houses, townhouses, units, and multi-dwelling developments. Our comprehensive schedules ensure you claim every dollar available under Australian taxation law.
Tax depreciation is an accounting concept recognizing that buildings and assets naturally decline in value over time due to wear and tear. Even when property values increase, the Australian Taxation Office acknowledges that building structures and installed assets deteriorate—making this loss claimable as a legitimate annual tax deduction.
This “paper deduction” reduces your taxable income without requiring any annual expenditure, improving cash flow and investment returns.
Any owner of income-producing property can claim tax depreciation, including:
The property must generate assessable income (rental or business income) to qualify for depreciation deductions.
Depreciation is available on all income-producing properties:
Residential:
Commercial:
Business:
Specialized:
Depreciation amounts vary significantly based on:
Typical ranges:
Brand New Properties (0-2 years):
Near-New Properties (3-10 years):
Established Properties (renovated):
Commercial Properties:
While not legally required, a professional depreciation schedule is essential for several reasons:
Maximized Deductions: Professional quantity surveyors identify deductions you’d likely miss, including historical renovations and optimal depreciation strategies.
ATO Compliance: Quantity surveyors are recognized by the ATO as qualified to estimate construction costs and asset values (Tax Ruling 97/25).
Audit Protection: Professional schedules provide defensible documentation if the ATO reviews your claims.
Time Savings: Your accountant can apply deductions directly without time-consuming research and calculations.
Accuracy: Professional valuation and calculation ensures correct deductions and compliance.
The additional deductions professionals identify typically far exceed schedule costs—often by 4x or more in year one alone.
Basic information required includes:
We handle all research, property searches, and coordination from there.
Fees vary based on property type and complexity:
Residential Properties:
Commercial Properties:
Important considerations:
Timeline:
A proper tax depreciation schedule includes:
Absolutely. You can:
Claim Current and Future Years: Obtain a schedule now to claim depreciation in current and all future tax returns.
Backdate Claims: Subject to ATO limitations, you may amend previous returns (typically 2-4 years) to claim previously unclaimed depreciation.
Even if backdating isn’t possible, obtaining a schedule prevents continuing to miss valuable deductions.
Division 43 covers structural building elements and permanent fixtures:
These depreciate at 2.5% annually for qualifying construction.
Yes! This is one of the most valuable aspects of tax depreciation.
You can claim capital works completed by any previous owner after the relevant construction date (generally post-1985), including:
Professional quantity surveyors research council records, building permits, and property history to identify these works—often adding thousands in previously unknown deductions.
Professional quantity surveyors use several methods:
Council Records: Building permits often include cost estimates or specifications.
Industry Databases: Historical construction cost data allows professional cost estimation.
Physical Evidence: Site inspection reveals construction methods, materials, and extent of works.
Professional Estimation: Quantity surveyors are qualified by the ATO to estimate construction costs when actual costs are unavailable (Tax Ruling 97/25).
This is why professional schedules capture deductions DIY approaches miss.
Division 40 covers removable assets and equipment:
Essentially, any asset that can be removed without affecting the building structure.
Legislative changes on 9 May 2017 mean:
For Residential Properties Purchased After 9 May 2017: You can only claim plant and equipment depreciation on:
You cannot claim depreciation on:
Important:
This makes identifying historical capital works renovations even more valuable for established property investors.
Absolutely. Established properties purchased after 9 May 2017 can still claim:
Division 43 Capital Works:
Division 40 Assets You Add:
Scrapping Write-Offs: When you replace existing assets, you can claim immediate write-offs for items you’re removing.
Professional schedules identify all available deductions despite the 2017 changes.
Simple Process:
Your schedule shows exactly what to claim each year, making application straightforward.
Yes. For Division 40 plant and equipment, you can choose between:
Diminishing Value Method:
Prime Cost Method:
Your schedule presents both methods. Once you select one and use it in your tax return, you must continue with that method for those assets.
Division 43 capital works must use the prime cost method (no choice).
No, you’re not required to claim depreciation.
However: The ATO considers depreciation as occurring regardless of whether you claim it. This means if you don’t claim depreciation for several years, you generally cannot later claim those “missed” years—the depreciation has effectively occurred.
Best Practice: Claim available depreciation annually to maximize tax benefits. The deductions reduce tax payable now, improving investment cash flow.
During Ownership: You claim depreciation throughout your ownership period, reducing tax payable annually.
At Sale: Depreciation claimed may be included in capital gains tax (CGT) calculations, depending on various factors.
Important: The annual tax savings during ownership typically far exceed any CGT impact at sale. Your accountant can advise on strategies to minimize CGT liability.
For most investors, claiming depreciation is financially beneficial even considering potential CGT implications.
Depreciation can affect CGT calculations:
Division 43 Capital Works: Generally included in the property’s cost base, potentially reducing capital gain.
Division 40 Plant & Equipment: May result in balancing adjustments if claimed depreciation exceeds actual value decline.
Your Accountant Should:
In almost all cases, the tax savings from claiming depreciation throughout ownership exceed any additional CGT.
No. Depreciation schedules are property-specific but owner-specific calculations.
New owners must:
As a seller, you should:
Yes, commercial and business depreciation has several differences:
Higher Values: Commercial properties typically have substantially higher depreciation deductions due to complex construction, expensive fit-outs, and valuable plant and equipment.
Different Rules:
Leasehold Improvements: Commercial tenants can claim depreciation on fit-out works they’ve funded.
Business Assets: Immediate write-offs and pooling strategies often available.
Absolutely. Business owners can claim depreciation on:
Small businesses may access instant asset write-offs and accelerated pooling strategies.
Properties converted from owner-occupied to rental use qualify for depreciation from the rental commencement date forward.
Structuring: Professional schedules structure deductions to minimize claims during owner-occupied periods and maximize claims during rental periods—fully within ATO guidelines.
You Can Claim:
Each property requires its own depreciation schedule, as every property has unique:
Portfolio Benefits:
This FAQ addresses the most common tax depreciation questions, but every property situation is unique. If you have specific questions about your property, investment strategy, or depreciation opportunities, our team is here to help.
Have you ordered a depreciation schedule for your commercial property. We are available 24 hours a day / 7 days a week and Australia wide.
Helping investors to claim maximum depreciation deduction. We will find the best way to save you dollars specific to your individual property or investment needs.
You are paying too much tax if you are not capitalising on the Tax Depreciation advantages. Our maximum deduction report is details, comprehensive and ATO compliant.
