Tax depreciation on a townhouse
A townhouse is an excellent investment from a depreciation perspective. They are typically attached dwellings on their own title or in a strata scheme, often built over two or three levels, and they tend to have more construction area than a ground-floor apartment — meaning more Division 43 capital works to claim.
Division 43 — Capital works
The building structure of your townhouse is depreciable at 2.5% per year for properties built after July 1985. This covers:
- External walls and roofing
- Internal walls on each level
- Stairs, balconies, and landings
- Structural bathroom and kitchen fitouts
- Garage structure (if integral to the building)
Division 40 — Plant and equipment
The fixtures and fittings inside your townhouse are separately depreciable:
- Oven, cooktop, and dishwasher
- Air conditioning (ducted or split system)
- Hot water system
- Carpet and hard floor coverings
- Blinds, curtains, and security screens
- Ceiling fans
Strata townhouses
If your townhouse is in a strata scheme, there are typically common areas such as shared driveways, gardens, or fencing. Your entitlement to claim common area depreciation depends on your ownership percentage in the scheme. Your quantity surveyor can advise on whether any common area construction costs should be allocated to your schedule.
Comparing to apartments
Townhouses generally produce higher depreciation deductions than apartments of similar value because:
- More total floor area over multiple levels
- Own roof structure (no penthouse or rooftop shared overhead)
- Often newer construction
- Separate outdoor areas sometimes include claimable structures
Getting started
A professional depreciation schedule from a quantity surveyor is the right first step. The schedule will itemise every claimable element and give you a year-by-year deduction forecast you can provide to your accountant.