How Claiming Full Deductions - Especially Depreciation, Can Supercharge Your Rental Property Cash Flow

Rental property investing isn’t just about collecting rent—it's about maximising returns. One of the most effective ways to do that in Australia is by fully claiming deductions on your rental income. Among these, depreciation stands out as a powerful tool to reduce your tax bill and boost your cash flow—without spending a cent.

What Counts as a Deduction?

When you earn rental income, you can deduct expenses related to owning and managing the property. These include:

  • Loan interest

  • Council rates

  • Insurance

  • Property management fees

  • Repairs and maintenance

  • Depreciation

Each deduction reduces your taxable rental income, which means you pay less tax.

Depreciation: The Hidden Advantage

Depreciation lets you claim the gradual wear and tear on your property and its assets. There are two main types:

  1. Capital Works Depreciation – for the building structure (e.g., walls, roof, concrete).

  2. Plant and Equipment Depreciation – for removable items (e.g., appliances, carpets, blinds).

The beauty of depreciation is that it’s a non-cash deduction—you’re not paying for it each year, but it still reduces your taxable income.

Example: How Depreciation Improves Cash Flow

Let’s say you own a rental property in Canberra:

  • Annual rental income: $30,000

  • Annual expenses (interest, rates, insurance, etc.): $10,000

  • Depreciation claim: $6,000 (based on a professional depreciation schedule)

Without Claiming Depreciation:

  • Taxable rental income = $30,000 - $10,000 = $20,000

  • If you're in the 37% tax bracket, tax payable = $7,400

With Claiming Depreciation:

  • Taxable rental income = $30,000 - $10,000 - $6,000 = $14,000

  • Tax payable = $5,180

Tax savings from depreciation alone: $2,220

That’s $2,220 back in your pocket—pure cash flow improvement, without any extra out-of-pocket expense.

Why Investors Miss Out

Many property owners skip depreciation because it’s not a visible expense. But ignoring it means leaving thousands on the table. To claim it properly, you’ll need a depreciation schedule prepared by a qualified quantity surveyor.

Final Thoughts

Claiming all eligible deductions - especially depreciation, isn’t just good accounting, it’s smart investing.

By reducing your taxable income, you increase your net cash flow and accelerate your wealth-building journey.

If you haven’t reviewed your rental property deductions lately, now’s the time. Our simple depreciation schedule could be the key to unlocking thousands in annual savings.