Property Depreciation Calculator

Property depreciation is two separate things. Capital works, under Division 43, is the building itself: the structure, and fixed items like walls, roofing and built-in cabinetry. Plant and equipment, under Division 40, is the removable assets inside it, such as ovens, carpet, blinds and air conditioners.

Capital works is the larger and steadier of the two, and it is available on most properties built after 15 September 1987. Plant and equipment often is not available at all.

Since 7:30pm on 9 May 2017, an investor who buys a second-hand residential property cannot claim decline in value on plant that somebody has already used. If you bought an established house in 2021, the existing oven and carpet carry no deduction for you, however much life is left in them.

This is why the tool answers plant with a verdict rather than a number. A calculator that estimates it as a percentage of the build will hand most buyers of established property a figure that should be zero.

Where construction started after 15 September 1987, capital works is 2.5% of the original construction cost a year, for 40 years from completion.

Where it started between 18 July 1985 and 15 September 1987, the rate is 4% a year over 25 years. That is a faster claim but a shorter one, and every property in that band has now run past 25 years, so nothing is left.

Residential construction that began before 18 July 1985 attracts no capital works deduction at all. Renovations done later can still qualify in their own right, starting their own 40 years from when that work was completed, even if the original building does not.

The clock runs from completion, not from when you bought. Buying a fifteen-year-old house means inheriting the remaining 25 years of its schedule, not starting a fresh 40.

The base for capital works is what it cost to build, excluding the land. It is not what you paid for the property, and using the purchase price will overstate the deduction substantially.

Most owners do not know the original construction cost, particularly on an older property. That is the job a quantity surveyor does, and their report is itself deductible. Where the cost genuinely cannot be established, the ATO accepts an estimate from an appropriately qualified person.

If you have the original build contract, use that figure. If you are estimating for planning purposes, be conservative, because an overstated construction cost produces an overstated deduction in every one of the remaining years.

Capital works deductions reduce the cost base of the property. Claim $8,000 a year for twelve years and your cost base is $96,000 lower, which makes the eventual capital gain $96,000 larger.

That is not an argument against claiming. The deduction saves tax at your marginal rate in every year you hold, and under current rules only half of what it adds back is taxed if you have held for more than twelve months. Taking it now and paying later is usually the better order.

It does mean the deduction is a deferral rather than free money, and it should sit in the same plan as the sale. The tool prints the annual cost base reduction next to the deduction for that reason.

The rule applies even where you did not claim. If you were entitled to a capital works deduction, the cost base is generally reduced whether or not you took it, so leaving it unclaimed usually gains nothing.