An apartment depreciation schedule is the document that tells you, in numbers, how much of your apartment’s construction cost and fittings you can claim as a tax deduction each financial year. For property investors, it is one of the most reliable ways to reduce taxable income without spending another dollar. That is because you are claiming the wear and decline in value of an asset you already own.
This guide covers how an apartment depreciation schedule works, what it includes for apartment owners and how much depreciation you could realistically claim.
A tax depreciation schedule is a detailed report, prepared by a qualified quantity surveyor, that sets out the depreciation deductions available on an income-producing property over its effective life.
You do not need to guess at figures or ask your accountant to estimate construction costs from scratch. The schedule gives you accurate, Australian Taxation Office (ATO) compliant depreciation calculations you can hand straight to your accountant at tax time.
For apartment owners specifically, a property depreciation schedule is often more valuable than for a house, because apartments typically include a larger share of common plant and equipment assets alongside the depreciable assets within your own unit.
Every residential tax depreciation schedule is built around two categories of claim.
Capital works deductions (Division 43) cover the original construction cost of the building itself: the structural elements, brickwork, concrete and fixed fittings. These are generally claimed at a flat 2.5% per year over 40 years from the date construction was completed. They typically make up the largest single component of an apartment depreciation schedule.
Plant and equipment depreciation (Division 40) covers the removable and mechanical items within the property, such as carpets, blinds, hot water systems and air conditioning units. Each of these is treated as a separate depreciating asset with its own effective life and depreciation rate, set out in the ATO’s own guidance.
It is worth noting that for plant and equipment in second-hand residential properties acquired after 9 May 2017, owners generally cannot claim depreciation on assets already installed by a previous owner. New investment properties and any plant and equipment you install yourself remain fully tax deductible under the usual rules. A quantity surveyor can confirm exactly which category applies to your circumstances during the property inspection.
Here is how the two categories compare. If your apartment building was completed 15 years ago, the capital works allowance continues on the original construction cost for the remaining 25 years of its 40-year life, regardless of how many owners the property has had.
Plant and equipment is assessed asset by asset instead. That is why two apartments in the same block, bought at different times, can end up with quite different depreciation schedules, even though the building itself is identical.
Because an apartment sits within a larger building, a depreciation schedule for apartment owners needs to separate what you own outright from what you share with other owners in the block.
Inside your own unit, the schedule will typically itemise fixed assets such as floor coverings, window furnishings, kitchen appliances, hot water systems and any built-in air conditioning. It also includes the structural elements and fit-out that make up your share of the capital works allowance.
Many apartment buildings include shared plant and equipment, such as a lift, communal air conditioning plant, fire indicator panels or a shared laundry. Your quantity surveyor will apportion a share of that equipment depreciation to your lot, based on your unit entitlement, in the same way body corporate or owners corporation levies are apportioned.
This is one of the main reasons an apartment building depreciation schedule benefits from being prepared by someone experienced with strata title properties, rather than treated as a standard house inspection.
When claiming depreciation on plant and equipment, property investors can generally choose between two calculation methods.
The diminishing value method applies a higher depreciation rate in the early years of an asset’s life, tapering off as the asset ages. This front-loads deductions, which can help improve cash flow sooner, particularly on a newly settled rental property.
The prime cost method spreads the same total deduction evenly across the asset’s effective life, giving a consistent, predictable depreciation claim each income year.
Capital works allowance is always calculated using the prime cost method, regardless of which method you choose for plant and equipment. Your quantity surveyor will typically model both methods and recommend whichever produces the better outcome for your financial position.
There is no single right answer between the two. An investor planning to hold an apartment long term may prefer the prime cost method for its steady, predictable claim. An investor focused on maximising deductions while cash flow is tighter after settlement may lean towards the diminishing value method instead.
A good tax depreciation schedule presents both calculations side by side, so you and your accountant can decide which suits your financial year, rather than locking you into one method by default.
How much depreciation an apartment attracts depends on a few key factors:
Newer apartments, or those that have undergone eligible structural renovations, generally offer higher depreciation deductions, because more of the building’s capital works allowance remains unclaimed.
A few misconceptions come up often enough among property investors that they are worth addressing directly.
“My apartment is too old to claim anything.”
The building’s age affects the capital works allowance, but plant and equipment within the unit, and any eligible structural renovations, may still carry meaningful remaining value.
Even a substantially renovated older building may still hold meaningful capital works deductions on the renovation itself, separate from the original construction. The only way to know for certain is to have a quantity surveyor assess the property in person, rather than assuming there is nothing left to claim.
“I can work out the depreciation myself from the purchase contract.”
A purchase price is not the same as a construction cost. Estimating construction costs without the right qualifications falls outside what the ATO accepts as a reliable basis for a claim, which is why a tax depreciation report needs to be prepared by a qualified quantity surveyor rather than calculated informally.
“My accountant already handles this.”
Most accountants are well placed to apply a depreciation schedule to your tax return. But preparing the underlying report, including the property inspection and the construction cost estimate, sits within the quantity surveying profession, not accounting. The two roles work together, not in place of each other.
A tax depreciation report is prepared by a quantity surveyor, who carries out a property inspection to identify every relevant asset. They measure and record the structural elements, then calculate the remaining value of each depreciable asset against its effective life.
During the inspection, the quantity surveyor photographs and lists plant and equipment assets room by room. This on-site work is what separates a genuine tax depreciation schedule from a desktop estimate, and it is also why the ATO expects depreciation claims to be backed by a properly documented inspection.
The result is a detailed report that runs for the life of the property, up to 40 years from construction. It only needs to be prepared once and can be used for every future tax return, updated only if you renovate or add new plant and equipment.
Most reports also include both the diminishing value method and the prime cost method for every depreciating asset, so you and your accountant retain the choice each financial year.
The fee for a tax depreciation schedule is itself fully tax deductible. Weighed against the depreciation deductions and tax benefits it typically unlocks over the life of the property, it is one of the more straightforward ways for property investors to reduce their tax bill and support their rental income, without materially affecting property management fees or ongoing running costs.
An existing schedule can sometimes be reused, but it needs to reflect the current owner's purchase and any changes to plant and equipment since it was prepared. A quantity surveyor can review an existing report and advise whether it still holds up or whether a new inspection is warranted.
No. A depreciation schedule and an insurance valuation serve different purposes and use different figures; one estimates construction cost for tax purposes, the other estimates the cost to rebuild for insurance purposes. They should not be treated as interchangeable documents.
Eligible structural renovations and new plant and equipment can generally be added to an existing schedule, so there is no need to start again from scratch. Keep records of renovation costs and let your quantity surveyor know so the schedule can be updated accurately.
The Acumentis property valuation team has the expertise to value any property for the following purposes
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