Depreciation

Definition

Depreciation is a non-cash tax deduction that allows property investors to claim the wear and tear of a building's structure (Division 43) and its fixtures and fittings (Division 40) as a tax deduction. A quantity surveyor prepares a depreciation schedule that outlines the deductions available over the life of the property.

Why It Matters for Property Investors

Depreciation can significantly improve the after-tax returns on an investment property, especially for newer buildings. It's a 'paper loss' — you claim a deduction without actually spending money. A typical depreciation schedule on a new property can yield $5,000–$15,000 in deductions in the first year alone. However, the ATO has restricted depreciation claims on second-hand fixtures for properties purchased after May 2017, making newer properties more attractive from a depreciation standpoint.