Why Property Investors in Australia Need a Property Depreciation Report

When it comes to Australian property investment, one of the most overlooked yet powerful tools for maximising returns is the property depreciation report.

This document, prepared by a qualified quantity surveyor, outlines the tax-deductible decline in value of a property’s structure and assets over time.

Under the Australian Taxation Office (ATO) standards, it’s not just helpful—it’s essential.

What Is a Property Depreciation Report?

A property depreciation report (also known as a tax depreciation schedule) details the wear and tear of a building and its fixtures. It allows investors to claim deductions under two key categories:

  • Division 43 – Capital Works Deductions: Covers the building’s structure and permanent fixtures (e.g., walls, roofing, plumbing).

  • Division 40 – Plant and Equipment Deductions: Includes removable assets like appliances, carpets, blinds, and air conditioning units.

These deductions reduce your taxable income, improving cash flow and boosting your overall return on investment.

Why It’s Crucial for ATO Compliance

The ATO has strict guidelines on how depreciation should be calculated and claimed. Here's why a professionally prepared report matters:

  • ✅ Accuracy: Quantity surveyors are recognized by the ATO as the only professionals qualified to estimate construction costs for depreciation purposes.

  • ✅ Compliance: A report ensures your claims align with ATO standards and is a safeguard to your claim in the event of an audit.

  • ✅ Record-Keeping: The ATO requires detailed documentation of asset values and effective lives.

Without a depreciation report, investors risk underclaiming or misclaiming deductions, which can lead to financial and legal problems.

Financial Benefits for Property Investors

A depreciation report isn’t just about ticking boxes—it’s a strategic asset. Here’s how it helps:

  • Reduces Taxable Income: Claiming depreciation lowers your annual tax bill.

  • Improves Cash Flow: More deductions mean more money in your pocket.

  • Offsets Renovation Costs: Even improvements made by previous owners may be claimable2.

  • Non-Cash Deduction: You don’t need to spend money to claim depreciation—it’s based on asset value loss over time.

For example, a new residential property with $400,000 in capital works and $50,000 in plant and equipment could yield around $20,000 in first-year deductions.

What’s Relevant in the Industry Today (2025 Update)

The property depreciation landscape is evolving. Here are key trends:

  • ATO Crackdown on Overclaims: The ATO is auditing aggressive depreciation claims, especially for second-hand assets.

  • Digital Audits: New compliance tools mean your depreciation schedule must be airtight.

  • Renovation Boom: Investors are leveraging depreciation on upgrades to older properties, especially in high-yield areas.

With rising costs of holding your rental property, interest payments and tighter rental markets, maximizing every dollar counts and depreciation is a no brainer when it comes to maximising the return on your investment.

How to Get Started

  1. Hire a Quantity Surveyor: Choose one with a strong reputation, years of industry experience and the professionalism to help you maximise your claim.

  2. Schedule a Site Inspection: They’ll assess all depreciable assets.

  3. Receive Your Report: Use it annually to claim deductions.

  4. Update as Needed: Renovations or new purchases should be added.

Final Thoughts

A property depreciation report is more than a tax tool—it’s a strategic advantage. It ensures compliance with ATO standards, unlocks thousands in deductions, and strengthens your investment’s financial foundation. In today’s competitive market, smart investors don’t leave money on the table—and depreciation is one of the easiest ways to claim it back.