Disclaimer: This calculator provides estimates only and should not be considered financial or tax advice. Always consult with a qualified tax professional or accountant before making investment decisions. This tool does not constitute advice from the Australian Taxation Office. Evercend Pty Limited does not hold an Australian Financial Services Licence.
Property depreciation inputs and results
Division 43: Building
Division 43 covers the original cost to build. It does not include the purchase price.
Residential construction that commenced before 18 July 1985 carries no Division 43 entitlement. Capital works deductions run from the date construction was completed.
Division 40: Plant and Equipment
Division 40 covers fixtures, appliances, carpet and blinds. Use 0 if unsure.
Your tax details
Used to calculate your marginal tax rate and estimated tax saving.
Enter your property details to begin
Enter the construction cost or plant and equipment value, plus your taxable income, to estimate your annual depreciation tax saving.
How property depreciation works
Depreciation lets a property investor claim the decline in value of a building and its fittings as a tax deduction each year. It is a non-cash deduction, which means it reduces your taxable income without you paying anything extra that year. This calculator estimates the two types of property depreciation, capital works and plant and equipment.
Capital works, known as Division 43, covers the building structure. Plant and equipment, known as Division 40, covers removable and mechanical items such as appliances, carpet and air conditioning. This is a model and general information, not tax advice. For an actual claim, a quantity surveyor usually prepares a depreciation schedule.
How to use this calculator
Enter the construction cost
Add the original building construction cost for the capital works estimate, or an estimate if you do not know it.
Add the plant and equipment value
Enter the value of removable assets such as appliances, carpet and blinds.
Choose the method
Select the diminishing value or prime cost method for the plant and equipment.
Read the deductions
The calculator estimates the yearly capital works and plant and equipment deductions.
How this calculator works
For a residential property, the Division 43 rate depends on when construction commenced. Construction that commenced between 18 July 1985 and 15 September 1987 is claimed at 4% of the construction cost each year for 25 years. Construction that commenced on or after 16 September 1987 is claimed at 2.5% each year for 40 years. Both run from the date construction was completed. Residential construction that commenced before 18 July 1985 carries no Division 43 entitlement.
Assumptions used
The capital works estimate applies the Division 43 rate for the construction period selected: 4% a year for construction that commenced between 18 July 1985 and 15 September 1987, 2.5% a year for construction that commenced on or after 16 September 1987, and nothing for construction that commenced before 18 July 1985. Non-residential buildings and short-term traveller accommodation run on separate rate tables and are not covered here. The Division 40 estimate uses a flat 15% of the plant and equipment value each year. That is a simplifying estimate used by this calculator, not an ATO rate. Actual decline in value depends on the effective life of each asset and on whether the prime cost or diminishing value method is used. The calculator does not apply the second-hand asset restriction in section 40-27 of the Income Tax Assessment Act 1997, under which an individual generally cannot claim decline in value on previously used plant and equipment in a residential rental property where the asset was acquired at or after 7:30pm AEST on 9 May 2017.
Worked example
A residential property built in 2010 had a construction cost of $300,000. The capital works deduction is 2.5% of $300,000, which is $7,500 a year for 40 years.
Separately, a dishwasher costing $1,000 with an effective life of 10 years is claimed under the diminishing value method. The first year deduction is $1,000 times 200% divided by 10, which is $200. The two deductions are added together, and both reduce taxable income without being a cash cost.
These are estimates. A quantity surveyor's depreciation schedule sets the actual construction cost and asset values.
What changes your depreciation deductions
Several things change the depreciation deductions available for an investment property. The main ones are:
Construction date
When construction commenced. Division 43 applies to residential construction that commenced after 17 July 1985, at 4% a year for 25 years where it commenced between 18 July 1985 and 15 September 1987, and at 2.5% a year for 40 years where it commenced on or after 16 September 1987.
Construction cost
The capital works deduction is a percentage of the original building cost, not the purchase price or land value.
Plant and equipment
Removable and mechanical assets decline in value over their effective life, set by the ATO for each item.
Method chosen
Diminishing value gives larger deductions early, while prime cost spreads them evenly over the effective life.
Second-hand assets
Whether the plant and equipment is second-hand. Under section 40-27 of the Income Tax Assessment Act 1997, an individual generally cannot claim decline in value on second-hand or previously used plant and equipment in a residential rental property where the asset was acquired at or after 7:30pm AEST on 9 May 2017. New assets the investor installs are not affected.
Effect on CGT
Capital works deductions you claim generally reduce the property's cost base, which can increase the capital gain on sale.
Rates and assumptions used
| Item | Value used | Source |
|---|---|---|
| Capital works rate (Division 43) | 4% a year for 25 years where residential construction commenced 18 July 1985 to 15 September 1987; 2.5% a year for 40 years where it commenced on or after 16 September 1987; no entitlement where it commenced before 18 July 1985 | ATO, Work out your capital works deductions |
| Prime cost method (Division 40) | Cost times days held divided by 365, times 100% divided by effective life | ATO, Prime cost and diminishing value methods |
| Diminishing value method (Division 40) | Base value times days held divided by 365, times 200% divided by effective life, for assets first held from 10 May 2006 | ATO, Prime cost and diminishing value methods |
| Division 40 estimate used by this calculator | Flat 15% a year of the plant and equipment value. A simplifying estimate used by this calculator, not an ATO rate. | Assumption of this calculator |
| Immediate deduction | Depreciating assets costing $300 or less can be claimed in full in the first year | ATO, Depreciating assets in rental properties |
| Second-hand assets | Denied for second-hand or previously used plant acquired at or after 7:30pm AEST on 9 May 2017 in a residential rental property, subject to the carve-outs in section 40-27 | ATO, Second-hand depreciating assets |
| Effect on CGT cost base | Capital works deductions claimed are not included in the cost base, which can increase the capital gain on sale | ATO, Cost base of assets |
Figures checked against the sources above on 11 October 2026.
Frequently asked questions
Division 43 is the capital works deduction for the building structure, such as walls, roofing and fixed items. Division 40 is the decline in value of removable and mechanical plant and equipment, such as appliances, carpet and air conditioning. They are claimed separately and can both apply to the same property.
The Division 43 rate depends on when construction commenced. Construction that commenced between 18 July 1985 and 15 September 1987 is claimed at 4% of the construction cost each year for 25 years. Construction that commenced on or after 16 September 1987 is claimed at 2.5% each year for 40 years. Both start from the date construction was completed. Residential construction that commenced before 18 July 1985 carries no entitlement.
Prime cost spreads the deduction evenly over the asset's effective life. Diminishing value gives larger deductions in the early years and smaller ones later. The total claimed over the life of the asset is similar, but the timing differs.
Under section 40-27 of the Income Tax Assessment Act 1997, inserted by the Treasury Laws Amendment (Housing Tax Integrity) Act 2017 (Act No. 126 of 2017), an individual generally cannot claim decline in value on second-hand or previously used plant and equipment in a residential rental property where the asset was acquired at or after 7:30pm AEST on 9 May 2017. New assets bought and installed by the investor are not affected. The restriction does not apply to excluded entities such as companies, super funds other than self-managed super funds, public unit trusts and managed investment trusts, to an entity carrying on a business of letting residential property, or to commercial property. Division 43 capital works deductions are not affected by this rule.
No. Depreciation is a non-cash deduction. It reduces your taxable income without any extra money leaving your pocket that year, which is why it can improve the after-tax return on a property.
Capital works deductions you claim are not included in the property's cost base, so claiming them can increase the capital gain when you sell. The plant and equipment side is treated separately. This is worth keeping in mind alongside the deduction.
A quantity surveyor prepares a depreciation schedule that sets the construction cost and the value and effective life of each asset. This calculator gives an estimate, while a schedule provides the figures used in a tax return.
No. It is general information and an estimate only. Evercend Pty Limited does not hold an Australian Financial Services Licence. For your own situation, consult a registered tax agent or a quantity surveyor.
Related calculators and guides
Sources
- •ATO, Work out your capital works deductions
- •ATO, Depreciating assets in rental properties
- •ATO, Second-hand depreciating assets
- •Treasury Laws Amendment (Housing Tax Integrity) Act 2017 (Act No. 126 of 2017)
- •ATO, Prime cost and diminishing value methods
- •ATO, Cost base of assets
Content reviewed and figures checked against the sources above on 11 October 2026.