Tax time is when a lot of Sydney landlords quietly leave money on the table. Not through anything dramatic — just a deduction most people never fully claim because they assume it doesn’t apply to them. It’s called depreciation, and for many investment properties it’s one of the single largest deductions available. Here’s how it works, why so many owners miss it, and how to make sure you’re not one of them this year.
Two kinds of deductions — and the one people forget
Most landlords are across the obvious deductions: the money that actually leaves your account each year — council rates, strata, management fees, repairs, loan interest, insurance. Those are easy to remember because you can see them on a statement.
Depreciation is different, and that’s exactly why it gets missed. It’s a non-cash deduction — you’re claiming the natural wear and ageing of the building and its fixtures over time, without spending a cent in that tax year. Because no invoice ever lands in your inbox for it, it’s the deduction people simply forget to claim.
What you can actually claim
Depreciation on an investment property falls into two buckets:
- Capital works (Division 43) — the building itself: the structure, and fixed items like walls, roofing, kitchen cabinetry and bathroom tiling. For eligible residential buildings this is generally claimed at 2.5% a year over 40 years.
- Plant and equipment (Division 40) — the removable, mechanical assets: oven, dishwasher, air-conditioning, carpet, blinds, hot-water system. These are written off over their individual effective lives.
“My property’s too old to claim” — usually wrong
This is the myth that costs landlords the most. A 2017 change to the rules means that if you buy an established (second-hand) residential property, you generally can’t claim depreciation on the existing plant and equipment left behind by the previous owner — only on assets you buy new yourself.
Plenty of owners heard “you can’t claim depreciation on an old property” and stopped there. But that rule only touches Division 40. The capital works (Division 43) deduction on the building itself is untouched — and on many properties that’s the bigger number. If your building was constructed or substantially renovated within the qualifying period, there is very often a meaningful claim sitting there, regardless of the property’s age. The only way to know is to have it assessed properly.
The document that unlocks it: a depreciation schedule
To claim depreciation correctly, your accountant needs a tax depreciation schedule — a report prepared by a qualified quantity surveyor that itemises everything you’re entitled to claim, year by year, for the life of the property. It’s a one-off report, the fee is itself tax-deductible, and it typically pays for itself many times over in the first year alone.
We work with Koste, a specialist tax depreciation and quantity-surveying firm, for exactly this. If you’d like your property assessed before you lodge this year, you can arrange a schedule through them here:
→ Order a tax depreciation schedule with Koste
Disclosure: Lifestyle Property Agency has a referral partnership with Koste and may receive a fee if you engage them through the link above. We only partner with providers we believe genuinely benefit our landlords, and a depreciation schedule stands on its own merits regardless.
Where depreciation fits in the bigger picture
Claiming everything you’re entitled to is one half of a healthy return; the other half is making sure the rent itself is where it should be. If you’ve never had an independent view on either, that’s worth fixing before the next financial year rolls around — see how we work to maximise your rental return, or get a current rental appraisal so you know your property is pulling its weight.
Frequently asked questions
Is a depreciation schedule worth it for a small apartment?
Often, yes — especially if the building or common property is relatively modern. A quantity surveyor will tell you upfront if there isn’t enough there to be worthwhile, so there’s little downside to asking.
Can I claim for previous years I missed?
In many cases your accountant can amend recent prior returns to capture depreciation you were entitled to but didn’t claim. Ask them once you have a schedule in hand.
Does this replace my accountant?
No. The quantity surveyor prepares the schedule; your accountant applies it in your tax return. This article is general information, not tax advice — your accountant should confirm what applies to your situation.
Talk to Dylan Henry
Dylan Henry is Business Development Manager and Partner at Lifestyle Property Agency. For a straight, no-obligation conversation about your property — how it is performing and how to get more from it — book a quick call.