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Australia · Rental property tax

Property depreciation calculator

What you can deduct each year for the building and the fittings of a rental property, and whether the fittings count at all.

Depreciation rules · verified against the official sources.

Someone lived in it before you

Don’t know it? It is what the building cost to build — never the price you paid, and never the land. A quantity surveyor’s report works it out, and if you had it built, your building contract shows it. Whether a report is worth ordering: the quantity surveyor cost page works out the break-even.

The write-off runs from completion. Leave that date blank if you do not know it and the years are counted from when construction began — which can only show less left, never more.

Your tally

Deduction in your first year

$10,000

Worth $3,200 less tax on your income.

How it’s made up

Capital works — the building
$10,000
2.5% for 40 years from completion — on these dates, until around May 2055. Counted from when construction began, as no completion date is entered.
Plant & equipment — the fittings
$0
Nil: second-hand fittings cannot be claimed by a residential landlord who bought after 7:30 pm on 9 May 2017. It is not a small claim you are missing — it is not available.

From the day you bought it, the building has $289,096 left to deduct, undiscounted — what remains of its write-off from completion, not the original construction cost. Capital works also reduce your cost base, so some of it comes back as capital gains tax when you sell.

Next: whether a surveyor’s report pays for itself → Quantity surveyor cost

What the building gets, by when it was built

Two deductions, two sets of rules. The building writes off at a flat rate for decades from completion; the removable fittings write off over their own lives — and for most people who have bought an established home since May 2017, they do not write off at all.

The capital works rate is fixed by the date construction began, and nothing about the property since then changes it. How long it lasts is counted from the date construction was completed, whoever owned the building in the meantime.

Capital works deduction for a rental home, by the date construction began
Construction beganRatePeriodWhy
Before 18 July 1985Nothing—No ordinary home qualifies. Before 22 August 1979 the Division does not apply (s 43-20(1)); to 19 July 1982 only hotels and short-stay apartment buildings did (s 43-75(2), Table 43-90); after that, s 43-185(2) treats a home as not income-producing.
18 July 1985 – 15 September 19874%25 yearss 43-25(2)(a). The 25 years run from completion, not from the start — enter both dates above to see whether any is left.
16 September 1987 onward2.5%40 yearss 43-25. The 40 years run from completion, so the earliest of these homes run out from late 2027. A contract signed before 16 September 1987 puts a later start in the 4% band instead (s 43-220).

The rule that decides it before any arithmetic

For income years from 1 July 2017, s 40-27 of the ITAA 1997 reduces the decline-in-value deduction — the section's own note says it can be reduced to nil — where you did not hold the asset when it was first used by anyone, and the income is from residential accommodation outside a business. It reaches assets acquired at or after 7:30 pm (ACT time) on 9 May 2017. In plain terms: buy an established home after that and the oven, carpet and blinds that came with it are worth nothing to you, however new they look.

Four ways out, and they are narrower than they sound: you signed for the property before that cut-off (a former home of yours also had to be rented out before 1 July 2017); the premises are new and nobody has lived there; you acquired within six months of the building being finished or substantially renovated, and no earlier holder could deduct; or the owner is a company, a managed investment trust or a large super fund. A self-managed super fund is not on that list — it is caught like an individual. Anything you buy and install yourself afterwards is new to you and deducts normally.

Wondering whether it is worth paying someone to itemise all this? Check what a depreciation schedule costs and whether the fee pays for itself. Putting the deduction into a full holding-cost picture is what the negative gearing calculator does.

Frequently asked questions

Why does my building give me nothing to depreciate?
Usually because of when it was built, not what it is worth. Three provisions shut out an ordinary home begun before 18 July 1985, one for each era: the Division itself starts on 22 August 1979, for almost three years after that only hotels and short-stay apartment blocks qualified, and a home begun from 20 July 1982 to 17 July 1985 is deemed not to earn income. The other way to get nothing is age at the far end: once 40 years from completion have passed (25 at the 4% rate), the write-off is used up even if you only bought last month. Renovations you pay for afterwards are a separate matter — those are your own construction expenditure and run their own clock from their own completion.
Is the rate 2.5% or 4%?
Both exist, and which you get turns on a 26-month window. Works begun after 21 August 1984 and before 16 September 1987 attract 4% over 25 years; from that date it is 2.5% over 40. Because a home only qualifies from 18 July 1985, the 4% band for a rental home is the stretch between those dates. Take a house begun in March 1986 and finished that December: its 25 years ran out late in 2011, so in practice the band now tells you the claim has finished rather than that it is generous.
I bought new but four months after it was finished. Is the plant gone?
No. The six-month rule is about the age of the building, not about whether anyone has stayed in it. The ATO’s own worked example has a buyer taking an apartment from a developer four months after completion, already tenanted, and still entitled — because the developer held the fittings as trading stock and could not have deducted them, and the supply happened inside six months. Sign after that six months and the same fittings become second-hand to you.
I bought an established place in 2016. Can I still claim the fittings?
Very likely. The restriction only reaches assets acquired from 7:30 pm on 9 May 2017, so a rental bought on a contract signed before then keeps its fittings claim — over whatever is left of each item’s effective life, not a fresh one. The trap is a home you lived in first: if it only became a rental after 30 June 2017, the fittings already in it are caught after all, because nothing could be deducted for them in 2016–17.
What goes into the construction cost?
What it cost to build, which is not what you paid for the property and never includes the land. The ATO counts preliminary expenses in it — architect, engineering and surveying fees, foundation excavation and building permits — alongside the construction itself. Where the original cost is unknown, the figure has to be estimated by someone qualified to do it, which is the job a quantity surveyor is actually being paid for.
Diminishing value or prime cost — does the choice matter?
It changes the timing, not the total. Diminishing value doubles the first-year deduction and then falls away as the written-down figure shrinks; prime cost pays the same amount every year against the original cost. Either way you eventually deduct the asset once. Diminishing value suits an investor whose income is high now, prime cost suits one expecting to earn more later, and the choice is locked in per asset once made.

Method & sources

  • Capital works rates, the eras before 18 July 1985 and the remaining balance: ITAA 1997 ss 43-20, 43-25, 43-30, 43-75, 43-185, 43-215, 43-220, 43-230 and 43-240, compilation in force 27 August 2026. The write-off is counted from completion, as the ATO states it; the Act counts from first use after completion, so an unused new build can have slightly more left.
  • The second-hand restriction, its exceptions and the cap on year-one decline: ITAA 1997 ss 40-27, 40-72(3) and 40-75(7), same compilation, and the Treasury Laws Amendment (Housing Tax Integrity) Act 2017, Schedule 2 item 13 (the 9 May 2017 cut-off).
  • Decline-in-value formulas, the $300 immediate deduction, the $1,000 low-value pool and the six-month example: ato.gov.au, depreciating assets in rental properties, last updated 21 May 2026; second-hand depreciating assets, last updated 22 June 2026; the 365-day denominator, Rental properties 2026.
  • Tax saved is the tax on your income without the deduction less the tax with it, from the site's FY 2026-27 brackets, Medicare levy and LITO, for a single resident — not a marginal rate applied to the whole deduction, which overstates it across a bracket edge.
  • This is general information, not tax advice. Effective lives, apportionment and eligibility turn on facts this page cannot see.

Next

What a depreciation schedule costs

Whether a quantity surveyor's fee pays for itself, given what this page says you can claim.

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