Property Depreciation Calculator Australia — Div 40 + Div 43

Property depreciation is the second-largest tax benefit on Australian investment property after interest deductibility. New builds can deliver $15,000+ in first-year deductions; established post-2017 second-hand stock typically delivers $8,000–$12,000 from Division 43 alone. This calculator estimates both Division 40 (plant & equipment) and Division 43 (capital works) for the projection horizon you choose.

Division 43 — capital works

Division 43 covers the structural building cost of residential investment property completed after 15 September 1987. The deduction is straight-line at 2.5% per year over a 40-year claim window from the date of construction completion.

Annual Div 43 = capital works value × 2.5%
40-year window from completion date

A property with $300,000 of capital works value claimed from year 1 would deliver $7,500 per year for 40 years — $300,000 of total deductions over the full window. Buying an existing property reduces the remaining window — a 10-year-old property has 30 years of Div 43 left, totalling $225,000 instead of $300,000.

Division 43 applies to second-hand residential property regardless of when you bought it — the post-2017 rule didn't touch capital works. The only requirement is that construction occurred after 15 September 1987.

Division 40 — plant & equipment

Division 40 covers the depreciable assets installed in the property — appliances, carpet, blinds, hot water systems, smoke alarms, air conditioning, light fittings, etc. Each asset has an ATO-published effective life (TR 2024/2 is the current ruling). The calculator uses a single weighted effective life for simplicity.

You can pick between two methods:

• Prime cost (straight-line): cost ÷ effective life each year, until written down to zero
• Diminishing value (front-loaded): typically (200% / effective life) × remaining written-down value

For a 10-year-life asset:

Year	Prime cost	Diminishing value
1	$1,000	$2,000
2	$1,000	$1,600
3	$1,000	$1,280
5	$1,000	$819
10	$1,000	$268
Total	$10,000	~$8,920

Diminishing value front-loads — bigger refunds in the early years, smaller later. Prime cost is steady. For a 10-year hold, diminishing value usually nets more total cashflow because of time value of the early refunds, even though total deductions are slightly lower.

The post-17 May 2017 rule

The big change for second-hand investment property buyers. From 17 May 2017:

• New builds / off-the-plan — full Div 40 claimable on the original installed plant
• Second-hand residential — Div 40 only on items YOU replace; inherited used items get nothing

So if you buy a 10-year-old established house in 2024, you cannot claim Div 40 on the existing kitchen, blinds, hot water system, etc. If you replace the dishwasher in year 2 and the carpet in year 3, those replacements ARE claimable as Div 40.

Division 43 (capital works) is unaffected — you can still claim 2.5% of the building structure's original construction cost regardless of when you bought it.

The calculator surfaces this with a warning banner when the second-hand limitation kicks in, and zeros out the Div 40 column.

What "isNewBuild" means in this calculator

For the purpose of Div 40 eligibility:

• New build = you bought the property as the first owner (typically off-the-plan, or vacant new construction) — Div 40 fully claimable
• Established = any second-hand residential — Div 40 blocked on inherited items if purchased after 17 May 2017

Commercial property doesn't have this restriction. The rule is residential-only.

How the schedule chart works

The bar chart shows year-by-year deductions for the first 10 years of your hold:

• Blue (Div 43): same height each year, until the 40-year window expires
• Violet (Div 40): tall in year 1, shrinking each year on diminishing value; flat on prime cost; zero throughout if the second-hand limitation applies

The first 10 years of a hold typically deliver 60–70% of total Div 40 deductions on diminishing value, vs ~25% on prime cost. Most investors who hold a property for 7–10 years pick diminishing value to maximise refund timing.

What this calculator does not cover

• Per-asset effective life — uses a single weighted average. A real QS report itemises each asset
• Low-value pool ($300 immediate write-off, sub-$1,000 pooling) — the calculator treats all plant as one bucket
• Substantial improvements — capital additions during the hold should usually be tracked separately
• Mid-year acquisition pro-rata — first-year deductions aren't pro-rated to the acquisition date in this calculator
• Full Div 40 individual asset effective lives — see ATO TR 2024/2 for the master list

For the actual deductions claimed on your tax return, you need a quantity surveyor's tax depreciation schedule. This calculator is a planning tool — it tells you whether the depreciation maths is significant enough to warrant a schedule, and what magnitude of refund to expect.

Why this matters for buyers agents

When showing investment property options to a client, depreciation is the difference between two near-identical-yielding properties looking very different on after-tax cashflow.

A new-build house delivering $14,000 first-year depreciation at 37% marginal rate generates $5,180 of refund cashflow. The same client buying an established house gets ~$7,500 of Div 43 only — $2,775 of refund. That's a $2,400 swing in year-one cashflow on near-identical-yield property.

Over 10 years, the differential between new-build and established stock can be $15,000–$25,000 of total tax refunds. That changes which property "fits" a particular investor's cashflow tolerance.