One of the most overlooked tax advantages for landlords is the ability to claim investment property depreciation deductions. Many property investors are surprised to learn that even older homes may qualify – sometimes unlocking thousands of dollars in savings every year.
At Property West, we regularly hear from investors who assume their property is too old to bother with depreciation. The reality? Investment property depreciation deductions can apply to almost all residential rental properties, no matter when they were built.
If you’re not claiming these deductions, you could be missing out on some serious tax-time benefits.
What Are Investment Property Depreciation Deductions?
Depreciation is all about recognising the natural wear and tear of your investment property over time. The ATO allows investors to claim this loss in value as a tax deduction. There are two main types of investment property depreciation deductions you need to know about:
1. Capital Works Deductions
This is the big one. Capital works refers to the building’s structure and permanently fixed features—things like kitchen cabinets, tiles, sinks, door frames, and even retaining walls.
Capital works deductions can usually be claimed for up to 40 years, depending on when the construction started and what type of building it is. These typically make up 85–90% of your total depreciation claim.
2. Plant and Equipment Deductions
This covers the assets that are easily removable, such as carpets, blinds, air-conditioners, appliances, and ceiling fans. The ATO provides effective life values for over 6,000 plant and equipment assets, which helps determine how much you can claim each year.
But here’s where it gets tricky: Since legislation changes in May 2017, investors who buy second-hand properties generally can’t claim plant and equipment deductions unless the items are brand new or part of qualifying works. Still, there’s plenty of value to be found if the property has had updates.
Renovations—Big or Small—Still Count when Claiming Investment Property Depreciation
Many investors assume they can’t claim much if they haven’t done a full kitchen or bathroom reno. But in reality, even minor improvements can count towards your investment property depreciation deductions.
Simple upgrades like a new garden shed, air-conditioner, pathway, or security screen doors might qualify under either capital works or plant and equipment. These things might seem small, but they add up over the years.
And don’t forget—just because you didn’t do the renovation doesn’t mean you can’t claim it. If previous owners renovated (and you have documentation or a depreciation schedule to support it), you may still be able to claim.
Can You Claim Missed Deductions?
Yes! If you’ve owned your investment property for a while, you may be able to amend your past tax returns. This could mean a boosted refund for you. Speak to your accountant to see if this applies to you. It could mean a nice little bonus refund just waiting for you.
Further Reading: ATO’s Official Rental Property Guide 2024
The ATO’s Rental Properties Guide 2024 explains how to report rental income and claim deductions. It covers both capital works and plant and equipment depreciation in detail.
This guide is a helpful resource for investors wanting to stay ATO-compliant.
✅ What’s Next?
If you own an investment property – especially here in Perth’s northern suburbs – and haven’t recently looked into your investment property depreciation deductions, now’s the time. A tax depreciation schedule, prepared by a specialist, can identify all the eligible deductions specific to your property.
They’ll review everything from your construction date to renovations and even take into account small assets you may not have realised were claimable.
Bottom Line: Don’t assume your property is too old to benefit from depreciation. Even long-standing homes can still offer valuable investment property depreciation deductions that put money back in your pocket.
Need help getting started? We’re more than happy to connect you with a trusted local tax depreciation specialist. Just reach out to the team at Property West—we’re here to help you maximise your rental return and make every dollar count.
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