Property Depreciation Calculator AU (Div 40 + Div 43)

What this calculator works out

This calculator estimates the annual tax depreciation deductions an Australian investor can claim on a residential investment property, broken down into:

1. Division 43 — capital works (the structural building and permanent fixtures), at 2.5% per annum over 40 years for residential construction that commenced on or after 18 September 1987.
2. Division 40 — plant and equipment (removable assets such as carpet, blinds, ovens, dishwashers, hot-water systems, air-conditioning units), depreciated over each asset’s ATO effective life using either the diminishing value or prime cost method.

It also flags two restrictions that catch out many private investors:

• The 9 May 2017 second-hand plant restriction introduced by the Treasury Laws Amendment (Housing Tax Integrity) Act 2017, which generally blocks individuals who acquired a second-hand residential property after that date from claiming Division 40 on previously-used plant and equipment.
• The 40-year capital works window — once the building has aged 40 years from its construction date, the original Division 43 deduction stream runs out (later renovations restart the clock for those works only).

The output is a year-1 deduction, a five-year deduction profile, and an indicative tax refund at your marginal rate. It does not replace a registered quantity surveyor’s tax depreciation schedule, which is generally required to claim depreciation in your tax return.

Where the formula comes from

Division 43 (capital works). Section 43-25 of the Income Tax Assessment Act 1997 sets the rate. For most residential rental construction the rate is 2.5% per year of the original construction expenditure, claimed straight-line over 40 years, beginning when the building is first used to produce assessable income. The ATO’s guidance page for Capital works deductions is the working source. The 18 September 1987 cut-off for residential is a hard date — earlier construction does not qualify, although a later renovation, bathroom rebuild or extension is treated as its own capital-works project starting on its own completion date.

Division 40 (plant and equipment). Section 40-25 allows a deduction for the decline in value of a depreciating asset used to produce assessable income. The ATO’s Effective life rulings (most recently TR 2024/4) set the years of effective life for each asset class. Two methods are available:

• Diminishing value: deduction in year n = opening written-down value × (200% ÷ effective life). Front-loaded; faster cost recovery.
• Prime cost: deduction = original cost × (100% ÷ effective life). Straight-line; even spread.

The calculator uses an 8-year blended effective life as a simplification (real schedules itemise each asset against TR 2024/4 lives, including a low-value pool below A$1,000). Plant and equipment is treated as 15% of the estimated build cost — a mid-point of the 10–20% range used by quantity surveyor desktop estimates.

Build cost estimation. When the buyer doesn’t have the original builder’s contract, the calculator estimates construction cost as floor area × per-m² rate by finish quality:

Finish	A$/m²
Low	A$1,800
Medium	A$2,500
High	A$3,500

These are mid-2020s indicative national averages drawn from public quantity-surveyor guidance (BMT Tax Depreciation, Washington Brown, Duo Tax). The figure is capped at 90% of the purchase price so the structural component never exceeds what was actually paid.

How to read the inputs

• Property type — Information only; the calculation is the same across houses, units and townhouses.
• Year construction completed — Drives Division 43 eligibility and the 40-year window. If construction commenced before 18 September 1987 the original building is outside Division 43.
• Purchase price (AUD) — Used as the cap on the estimated build cost.
• Year you acquired the property — Compared with 9 May 2017 to apply the second-hand plant restriction. Acquisitions in 2017 are treated as on-or-after the cut-off.
• Internal floor area (m²) — Used with the per-m² rate to estimate build cost.
• Finish quality — Selects the per-m² benchmark.
• Marginal tax rate — Used only for the indicative refund. Pick the rate that applies to the next dollar of taxable income, including Medicare levy where relevant.
• Depreciation method — Diminishing value front-loads the Division 40 deduction; prime cost spreads it evenly. Once chosen for an asset, the method generally cannot be switched mid-life.
• Acquired brand-new — Tick this if the property was acquired directly from a developer and never previously occupied. New properties keep full Division 40 access regardless of the 2017 restriction.

Worked examples

1. Brand-new 200 m² house in regional NSW, A$700,000, medium finish, 37% marginal rate, diminishing value. Build cost = 200 × A$2,500 = A$500,000. Div 43 = A$500,000 × 2.5% = A$12,500/year. Div 40 plant pool = A$500,000 × 15% = A$75,000; year-1 diminishing = 25% × A$75,000 = A$18,750. Year-1 total deduction = A$31,250; indicative refund at 37% ≈ A$11,562.

2. 1990-built unit, A$500,000 purchase in 2025, 80 m², medium finish, 37%, diminishing value, second-hand. Div 43 still applies (1990 ≥ 1987 and age 35 < 40): A$200,000 × 2.5% = A$5,000/year. Div 40 blocked under the 9 May 2017 second-hand rule: A$0. Year-1 total ≈ A$5,000; refund ≈ A$1,850. The lost A$15k+ of plant deductions is the cost the 2017 reform was designed to remove from the secondary market.

3. 1980-built post-war house, A$600,000 in 2025, 150 m², low finish. Construction predates 18 September 1987 — the original building is outside Division 43. Plant is also blocked under the 2017 rule. Year-1 deduction = A$0. Any later structural renovation built post-1987 (a kitchen rebuild, an extension) can be depreciated separately on its own capital works base — the calculator does not model that here.

4. Prime cost vs diminishing on the same A$75,000 plant pool. Diminishing value year 1 = A$18,750 (25%); prime cost year 1 = A$9,375 (12.5%). Diminishing produces a bigger refund early but tapers; prime cost stays at A$9,375 every year for eight years. Investors planning to hold for the full effective life often prefer prime cost; investors planning to sell or refinance within four to five years usually prefer diminishing value.

5. High-finish new apartment, 90 m², A$850,000 purchase price, 45% marginal, diminishing. Build cost = 90 × A$3,500 = A$315,000 (under the 90% cap of A$765,000). Div 43 = A$7,875/year. Plant pool = A$47,250; year-1 diminishing = A$11,812. Year-1 total ≈ A$19,687; indicative refund at 45% ≈ A$8,859. This is the kind of figure a quantity surveyor’s sample report (BMT, Washington Brown) typically shows for a brand-new inner-city unit.

Common pitfalls

• Depreciation is not a refund — it’s a deduction. Reducing taxable income by A$31,250 at a 37% marginal rate frees up A$11,562 in tax. The other A$19,688 stays inside the property as a non-cash expense, and it reduces the cost base for capital gains tax when you eventually sell.
• The 2017 second-hand plant rule applies to individuals, not all owners. Companies, large unit trusts and managed investment trusts are typically not affected. If you are a personal investor who bought an established property after 9 May 2017, treat Division 40 on existing plant as zero unless you replace an asset yourself with a new one.
• A quantity surveyor’s schedule is generally required. The ATO accepts only a few professions as appropriately qualified to estimate historical construction costs where the original invoice isn’t available. The schedule fee is itself deductible. Without one, most investors cannot substantiate Division 43 in audit.
• Renovations restart the clock for those works only. A 2010 kitchen rebuild on a 1965 house gets its own 40-year capital works deduction stream from 2010, even though the underlying building is outside Division 43. Get the QS to apportion.
• Don’t double-count. Division 40 plant and equipment is separate from Division 43 capital works. A built-in oven is plant; the kitchen cabinetry it sits in is capital works. A QS schedule splits them; a desktop estimate like this one approximates the split at 15%/85%.
• Estimated build cost is not market value or insurance value. It is the original construction cost — what the builder charged when the property was built — not what it would cost to rebuild today and not what the property is worth.

When to talk to a professional

A quantity surveyor’s tax depreciation schedule is generally required to claim depreciation in your tax return when the original construction cost is not in the owner-builder records. The schedule typically costs A$600–A$900 and pays for itself in the first year for most investment properties. For tax-return-ready figures, the lodgement decision and any complex situation (foreign owner, mixed-use property, recent renovation, deceased estate, special-purpose vehicle), use a registered tax agent and a quantity surveyor jointly. This calculator gives a general estimate only — nothing on this page is personal tax, legal or financial advice.

Related calculators

• NSW Land Tax Calculator — the annual NSW land tax bill on the same property, including the 5% foreign owner surcharge.
• NSW Stamp Duty Calculator — the one-off transfer duty paid at settlement.
• VIC Stamp Duty Calculator — the Victorian equivalent for cross-border investors.
• Negative Gearing Calculator — combine the depreciation figure here with rental income and interest to model the net tax position.
• HECS-HELP Repayment Calculator — repayment thresholds use the same taxable-income figure that depreciation reduces.

Sources:

• ATO — Capital works deductions (Division 43)
• ATO — Depreciating assets (Division 40)
• ATO — TR 2024/4 Effective life of depreciating assets
• ATO — Rental properties guide
• Treasury Laws Amendment (Housing Tax Integrity) Act 2017
• Income Tax Assessment Act 1997 — Division 40 and Division 43