What is tax depreciation?

The Australian Taxation Office (ATO) allows investment property owners to claim deductions on the fair wear and tear on an investment property and its fittings. Tax depreciation is essentially a non-cash deduction. You don’t necessarily have to directly incur the expense to be able to claim tax deductions, you can inherit deductions upon acquisition of the property (different rules apply for residential properties purchased post 9 May 2017). Tax depreciation is split into two categories; Division 43 Capital Works Allowances (the building itself) and Division 40 Plant and Equipment (eg. carpets, blinds, A/C, ceiling fans etc.)