What is Tax Depreciation?

What is Tax Depreciation?

Tax depreciation on a residential or commercial investment property is a deduction against assessable income allowing the owner to reduce the amount of taxation payable. The deduction is based on the depreciating value of the property asset.

An investor is able to claim for two distinct types of depreciation on buildings, which are explained below.

What is a Tax Depreciation Schedule?

A tax depreciation schedule is a professional report prepared by a Quantity Surveyor which shows the depreciation amount claimable in the property over the life of the building. Tax Depreciation schedules should last 40 years (a "lifetime" report) and include both the diminishing value method (which includes 100% deductions and pooling) and the prime cost method.

The report will identify each year, from the date of purchase, the total tax depreciation claim available to the property investor.

The Two Categories of Depreciation


Capital Allowance (Division 43)

This deduction is based on the historical construction costs of the property which may include surveying, engineering, architectural and building fees. However this cost does not include the land acquisition cost and site preparation. For residential properties the property has to be built after the 15th/16th of September 1987 and commercial properties after July 1982. The rate of depreciation is fixed over either 25 or 40 years (determined by criteria set by ATO legislation).

Typical Division 43 components are driveways, the building structure itself, concrete, carports and most other capital improvements.

Section 7.11
Section 7.12

Plant and Equipment (Division 40)

Plant and equipment asset items are depreciated at a higher rate than that applied to the building. Assets included in this class are predefined by ATO legislation and the rate of depreciation is determined by the Commissioner of Taxation. The rate of depreciation reflects the Commissioners interpretation on the effective life of the asset to produce assessable income. Typical plant and equipment items are air conditioners, blinds, carpets, curtains, door closers, hot water systems, ovens, range hoods and many other items.

Deductions are calculated based on opening or residual value of an asset, and depreciated through effective lives and depreciation rules as prescribed by the Australian Tax Office (ATO).

Benefits of having a recent Tax depreciation report

It is important that the report is undertaken by a qualified Quantity Surveyor and recognised Tax Depreciation Expert. MCG are industry leaders in the preparation of tax depreciation schedules and are members of the Australian Institute of Quantity Surveyor (AIQS), the Royal Institute of Chartered Surveyors (RICS) and registered tax agents.


We guarantee to find at least double our fee worth of depreciation deductions within the first full year. That's the MCG Guarantee!


Our fee is 100% tax deductible and we'll never complete a report unless we know it's going to be beneficial to you.


Our reports are turned around swiftly starting with inspectors always at the ready and strict deadlines in the office. We're here to help.

A Quantity Surveyor should be able to answer all of your detailed questions and will ensure that no items are missed, the maximum claim is made and that the report complies with the ever changing rules prescribed by the Australian Taxation Office (ATO).

We service Sydney, Newcastle, Melbourne, Brisbane, Adelaide, Perth & Regional Australia.

Talk to one of our tax depreciation experts today
on 1300 795 170 to ensure you have a professional
maximising your tax depreciation deductions.