Can I still claim property depreciation if I bought an older investment property after 2017?

Yes — but with an important distinction. The 2017 Housing Tax Integrity Act change prevents individual investors from claiming Division 40 (plant and equipment) depreciation on pre-existing fixtures and fittings in residential properties they bought after 9 May 2017 if the property was previously lived in. However, Division 43 (capital works) depreciation on the building and structural improvements is completely unaffected and still fully claimable — and this typically represents 85–90% of total depreciation in a residential property. You can also claim Division 40 on any new assets you install yourself.

Do I need a quantity surveyor to claim property depreciation?

The ATO accepts that for many properties, a qualified quantity surveyor is the only professional suitably qualified to estimate construction costs and plant values where original records aren't available. While not legally mandatory, a tax depreciation schedule from a registered quantity surveyor is the standard way to substantiate claims — particularly for capital works on older properties where original construction costs are unknown. The schedule typically costs $500–$800 and covers the property for up to 40 years.

Can I claim depreciation on a brand-new investment property?

Yes — brand-new residential properties are not subject to the 2017 second-hand plant and equipment restrictions. If you buy a new property (or substantially renovated property where the previous fixtures have been replaced), you can claim both Division 43 capital works and full Division 40 plant and equipment depreciation on all eligible assets. New investment properties generally have the highest depreciation claims in the first few years.

Can I amend past returns to claim missed property depreciation?

Yes. If you have a tax depreciation schedule (or obtain one now), you can use it to amend prior-year tax returns where depreciation was under-claimed or not claimed at all. The amendment period is generally two years for individuals and four years for small businesses from the date of the original assessment. A quantity surveyor can prepare a retrospective schedule that supports the amendment. Missed depreciation from even two or three years can represent a significant reclaim.

Evidence-backed. Sourced from the ATO, BMT Tax Depreciation, Bentleys, NAB, Washington Brown and independent tax advisers. General information only — not financial or tax advice. Depreciation rules depend on your property type, purchase date and circumstances. Consult a registered tax agent or quantity surveyor for advice on your situation. Last updated: June 2026.

⚡ Key Takeaways

Property depreciation splits into two categories: Capital works (Division 43) — the building itself, structural improvements, claimed at 2.5% per year over 40 years — and Plant and equipment (Division 40) — fixtures and fittings like carpets, air-conditioners, hot water systems, blinds and appliances. ^[1][5]
The 2017 Housing Tax Integrity Act change prevents individual investors from claiming depreciation on second-hand plant and equipment in residential properties purchased after 9 May 2017 if the property was previously lived in. However, capital works claims are completely unaffected — and typically represent 85–90% of total depreciation in residential properties. ^[4][1]
BMT Tax Depreciation found an average of almost $9,000 in first-year deductions across all residential properties — and even for properties affected by the 2017 changes, an average of $5,641 per year. At a 34.5% marginal rate, that’s $1,900–$3,100 in annual tax savings most landlords aren’t claiming. ^[4][9]
Many landlords only claim interest, rates, insurance and agent fees and ignore depreciation entirely — one of the largest deductions available. Tax NextGen’s 2025 landlord guide calls this one of the most common and most expensive mistakes Australian property investors make. ^[2]
A tax depreciation schedule from a qualified quantity surveyor typically costs $500–$800, covers the property for up to 40 years, and can also be used to amend prior-year returns and claim missed deductions retrospectively within the amendment period. ^[9][3]
A critical and persistent confusion: repairs are immediately deductible, but improvements and renovations must be depreciated as capital works over time. Misclassifying an improvement as a repair inflates deductions and triggers audit risk. Failing to claim improvements at all costs years of missed capital works deductions. ^[5][6]

Property Depreciation Australia 2026: How to Claim Your Hidden Tax Savings

Q: What is the difference between a repair and an improvement for tax purposes?

Repairs restore a property to its original condition after damage or wear — they are immediately deductible as rental expenses. Improvements make the property better, more valuable or different than it was before — they must be capitalised as capital works and depreciated over time (typically 2.5% per year for residential properties). Incorrectly claiming an improvement as an immediate repair is a common audit trigger. Common improvements incorrectly called repairs include full kitchen replacements, bathroom renovations, extensions, and structural upgrades.

By The Fine Print editorial team | Last updated: June 2026 | 12 min read | ⚠️ Not financial advice

Depreciation is the tax deduction most Australian property investors never claim — because it doesn’t show up in your bank account. You don’t write a cheque for it, receive a bill for it, or see it in your property management statement. But the ATO allows you to claim the wear and tear on your investment property every year, and for many landlords, this is one of the largest deductions available. BMT Tax Depreciation finds clients an average of almost $9,000 in first-year deductions alone. The ATO isn’t going to remind you to claim it. Here’s how it works in 2026.

📋 What’s in This Guide

The two types of property depreciation
The 2017 rule change — what it actually means for you
How much depreciation can you actually claim?
Repairs vs improvements: the classification that matters most
Tax depreciation schedules — when they’re worth it
What the ATO updated in 2026
Three actions to take now
Frequently asked questions

The Two Types of Property Depreciation

The ATO splits rental property depreciation into two distinct categories, each with its own rules and rates. Understanding the difference is the foundation of every valid depreciation claim. ^[1][5]

Division 43 — Capital Works

Covers the construction cost of the building itself and certain structural improvements: walls, roof, floors, concrete driveways, fences, some built-in items. Claimed at a fixed percentage per year — typically 2.5% per year over 40 years from the date construction was completed. For most residential investment properties built after 16 September 1987, this deduction is available to the owner for the remaining life of the 40-year period from original construction. The 2017 rule changes did not affect capital works claims. ^[5][1]

Division 40 — Plant and Equipment (Depreciating Assets)

Covers fixtures and fittings that can be removed from the property: carpets, hot-water systems, blinds, air-conditioners, appliances, some furniture and freestanding items. Each asset has an effective life and you choose between the ATO’s prime-cost (straight-line) or diminishing-value method to calculate the annual decline in value. This is the category affected by the 2017 rule changes. ^[1][5]

The 2017 Rule Change — What It Actually Means for You

The Treasury Laws Amendment (Housing Tax Integrity) Act 2017 changed the rules for individual investors buying residential properties. The change: if you’re an individual investor who bought a residential property after 9 May 2017 that was previously lived in (i.e. not brand new or substantially renovated), you generally cannot claim Division 40 (plant and equipment) depreciation on the pre-existing fixtures and fittings. ^[4][1]

💡 What you can still claim after the 2017 change:

Capital works (Division 43) on the building — completely unaffected by the 2017 rule, and typically represents 85–90% of total depreciation in residential properties
Full Division 40 depreciation on any new assets you purchase and install yourself (replace the carpet, install a new AC, add appliances — these are fully deductible at your expense)
Full plant and equipment depreciation on brand-new residential properties, substantially renovated properties, commercial properties, or properties held in a company, trust or fund rather than by an individual directly

⚠️ The most expensive myth from the 2017 change: BMT Tax Depreciation explicitly warns that a “common myth” emerged after 2017 that older or second-hand properties have no depreciation. This is wrong. Capital works on older buildings — which make up the vast majority of depreciation — are still fully claimable. Many investors are leaving years of Division 43 deductions on the table because they assumed the 2017 change eliminated their depreciation entirely. ^[4]

How Much Depreciation Can You Actually Claim?

BMT Tax Depreciation, one of Australia’s largest specialist quantity surveyor firms, reports that across all residential properties they assessed in one year, clients received an average of almost $9,000 in first-year deductions. Even for properties directly affected by the 2017 changes (existing properties bought by individual investors after May 2017), the average was $5,641 per year — almost entirely from capital works. ^[4][9]Bentleys notes that tax depreciation “plays a crucial role in helping property investors and landlords maximise tax deductions and improve their financial position”, with typical schedules producing many thousands of dollars per year depending on the property’s age and original construction cost. The tax benefit depends on your marginal rate — at 34.5% (including Medicare levy), an extra $5,000 in depreciation saves $1,725 in tax; an extra $10,000 saves $3,450. For someone in the 47% bracket, those same figures are $2,350 and $4,700. ^[3][8]

Repairs vs Improvements: The Classification That Matters Most

This is where many landlords either claim incorrectly and trigger audit risk, or fail to claim legitimately and give up deductions they’re entitled to. The ATO rental-expenses guidance draws a clear distinction: ^[5][6]

Repairs and maintenance — fixing existing damage or wear to restore the property to its original condition. A broken fence repaired to the same standard, a leaking pipe fixed, a damaged section of carpet replaced like-for-like. Immediately deductible as a rental expense.
Improvements and capital works — changes that make the property better, more valuable or structurally different than before. A new kitchen, an extension, a converted garage, new structural fencing, an additional bathroom. Must be capitalised and depreciated as capital works over time (generally 2.5% per year), not claimed immediately.

Two equally bad mistakes: claiming a new kitchen as an immediate repair (incorrect — it’s an improvement, and claiming it immediately risks penalty and denial in an audit); and spending on a significant renovation and never claiming the capital works depreciation because you weren’t aware it was available. Both errors are common. The ATO’s 2026 rental deductions crackdown explicitly includes misclassified repairs vs capital works as an audit focus area. ^[5][6][11]

Tax Depreciation Schedules — When They’re Worth It

A tax depreciation schedule is a specialist report prepared by a qualified quantity surveyor that breaks down all claimable capital works and plant-and-equipment deductions year by year. The ATO accepts that for many residential properties, only a qualified quantity surveyor is suitably qualified to estimate construction costs and plant values when original records are unavailable. ^[1][10]A typical schedule costs $500–$800 as a one-off fee (the fee itself is also tax-deductible). Once prepared, it’s valid for the life of the property — up to 40 years — with updates needed only if substantial renovations occur. Crucially, a new schedule can also be used to amend prior-year tax returns within the amendment period to claim depreciation that was missed in previous years. If you’ve owned a property for several years and never claimed depreciation, it may be worth getting a schedule and then amending returns to recoup those missed deductions. ^[9][3][10]

💡 The ROI test: Get a free estimate from a quantity surveyor (most offer this). If their estimated first-year deduction is, say, $6,000, and your marginal rate is 34.5%, your first-year tax saving is approximately $2,070. Against a schedule fee of $700, the report pays for itself three times over in year one — and continues generating deductions for decades. ^[9][3]

What the ATO Updated in 2026

In May 2026, the ATO updated its “Depreciating assets in rental properties” page and the 2025 rental-expenses instructions, clarifying what counts as depreciating assets vs capital works, when to apportion for private use, and how to treat assets in holiday homes and mixed-use properties. The ATO also released a rental-property video series in 2025–26 emphasising capital works deductions for structural improvements — specifically to remind landlords not to miss them. ^[1][6][7]The wider ATO focus on rental deductions in 2026 — including inflated interest claims, holiday homes and incorrect repairs vs capital works classification — means poorly documented or inflated depreciation schedules face greater scrutiny. Quality, ATO-compliant schedules from registered quantity surveyors, with accurate classification of all works, are the standard the ATO expects. ^[5][6]

✅ Three Actions to Take Now

Action 1: Get a depreciation schedule if your property warrants it

If you own a new or relatively new investment property, have done major renovations (by you or a previous owner), or own any property with significant fixtures and improvements, contact a qualified quantity surveyor for a free estimate. The estimate will tell you the expected first-year and lifetime deductions before you commit to paying for a full schedule. The key eligibility checks: was the building constructed or substantially renovated after 16 September 1987? (Capital works available.) Did you purchase it as a new or substantially renovated property after May 2017? (Full plant and equipment also available.) Have you installed any new assets yourself? (Depreciation available regardless of when you bought.) Use firms registered with the Australian Institute of Quantity Surveyors (AIQS) or the Royal Institution of Chartered Surveyors (RICS) to ensure the schedule is ATO-compliant. ^[9][3][10]

Action 2: Check your past returns for missed depreciation

Pull up your last two or three tax returns and check the rental-property schedule. Did you claim capital works (the 2.5% building write-off)? Did you claim any plant and equipment depreciation on assets you installed? If you only see interest, council rates, insurance, property management fees and general maintenance, you almost certainly missed depreciation — especially capital works, which the 2017 changes didn’t affect. If you have a depreciation schedule from a quantity surveyor, compare the figures in your returns to what the schedule says you could claim. If you don’t have a schedule, get one. If prior years were under-claimed, you can amend returns going back two years for individuals (or four years for small businesses) by lodging an amendment via myGov or through your tax agent. The missed deductions can be substantial. ^[2][6][3]

Action 3: Separate repairs, improvements and personal use correctly going forward

For any work done or planned at your investment property, apply this classification before you lodge: repairs and maintenance (fixing existing damage to restore original condition) are immediately deductible as rental expenses; improvements and renovations (new bathroom, extension, upgraded kitchen, new structural items) are capital works to be depreciated at 2.5% per year and must not be claimed as immediate repairs. If your property is used partly personally — as a holiday home, through Airbnb with owner stays, or any other mixed use — you must apportion all deductions including depreciation to exclude the private-use portion. Keep records of every day the property was rented vs personally used. Use the ATO’s rental-expenses page as the classification guide, or ask your tax agent to review major projects before you lodge. Getting the classification right now prevents denied claims and audit complications later. ^[5][1][6]

❓ Frequently Asked Questions

Can I still claim depreciation on an older second-hand property bought after 2017?

Yes. The 2017 change only restricted Division 40 (plant and equipment) on pre-existing fixtures. Division 43 (capital works on the building) is unaffected and typically makes up 85–90% of total depreciation — fully claimable regardless of when you bought. You can also claim Division 40 on any new assets you install yourself. ^[4][1]

Do I need a quantity surveyor?

Not legally mandatory, but for most residential properties where original construction records aren’t available, a registered quantity surveyor is the only professional who can adequately estimate construction costs for a capital works claim. The ATO endorses this approach. The schedule typically costs $500–$800 and covers 40 years. ^[1][10]

What’s the difference between a repair and an improvement for tax?

Repairs restore original condition = immediately deductible. Improvements make the property better = capital works, depreciated at 2.5%/year. Claiming an improvement as a repair is an audit trigger. Not claiming improvements as capital works loses years of deductions. ^[5][6]

Can I amend past returns for missed depreciation?

Yes — within the amendment period (generally 2 years for individuals, 4 years for small businesses from the original assessment). Get a retrospective depreciation schedule and lodge amendments via myGov or through your tax agent. ^[3][9]

⚖️ The Fine Print Verdict

Depreciation is the tax deduction most property investors never see — because it doesn’t show up in any bank statement. The ATO allows you to claim thousands of dollars every year for the wear and tear on your property, and in 2026, it’s often the difference between a negatively geared property that bleeds cash and one that quietly works. The 2017 changes created confusion — but they didn’t eliminate most depreciation. Capital works claims, which represent the majority of total depreciation on most properties, were untouched. Thousands of landlords are donating significant annual tax savings to the ATO simply because they misread what the 2017 change actually did, or because they’ve never ordered a schedule. A $700 report that generates $2,000 a year in tax savings for 40 years is one of the better investments in property investing.

👉 Get an estimate. Check your past returns. Claim what the law allows — the ATO won’t remind you to do it.

📬 Want the Fine Print — Straight to Your Inbox?

Plain-English breakdowns of Australian money news every week — no jargon, no spam.

🔔 Subscribe Free

📚 Sources & References

ATO, “Depreciating assets in rental properties,” ato.gov.au/individuals-and-families/investments-and-assets/property-and-land/residential-rental-properties/rental-expenses/depreciating-assets-in-rental-properties
Tax NextGen, “Rental property tax deductions in Australia — what you can claim,” taxnextgen.com.au/resources/blogs/rental-property-tax-deductions-in-australia-what-you-can-claim/
Bentleys, “Tax depreciation in Australia — how to maximise your deductions,” bentleys.com.au/resources/tax-depreciation-in-australia-how-to-maximise-your-deductions/
BMT Tax Depreciation, “Depreciation rules have changed,” bmtqs.com.au/depreciation-rules-have-changed
ATO, “Rental expenses — residential rental properties,” ato.gov.au/individuals-and-families/investments-and-assets/property-and-land/residential-rental-properties/rental-expenses
ATO, “Rental properties 2025 — rental expenses,” ato.gov.au/forms-and-instructions/rental-properties-2025/rental-expenses
ATO via Facebook, “Rental property video series,” facebook.com/atogovau/posts/
NAB, “Claiming depreciation on investment property,” nab.com.au/personal/life-moments/home-property/invest-property/claim-depreciation
BMT Tax Depreciation, “Residential property depreciation,” bmtqs.com.au/residential-property-depreciation
Washington Brown, “Tax depreciation schedules,” washingtonbrown.com.au/tax-depreciation-schedules/
Moshav, “Rental property tax deductions 2025 — complete guide,” moshav.com.au/rental-property-tax-deductions-2025-complete-guide-for-australian-property-investors/
Duo Tax, “Tax depreciation for foreign investors buying property in Australia,” duotax.com.au/insights/tax-depreciation-for-foreign-investors-buying-property-in-australia/

This article is general information only and does not constitute financial or tax advice. Property depreciation rules depend on your property type, purchase date, use and specific circumstances. Consult a registered tax agent and/or quantity surveyor for advice tailored to your situation. The Fine Print 🇦🇺 is not affiliated with the ATO or any quantity surveying firm.

0 Shares