Deductions on a brand-new investment property
A brand-new investment property gives you access to the maximum possible tax depreciation deductions. Unlike second-hand properties — which have restrictions on plant and equipment claims since the May 2017 budget — new properties are fully eligible for both types of depreciation.
Division 43 — Capital works (the building)
The building structure itself can be claimed at 2.5% per year over 40 years. This includes:
- Walls, roof, and floors
- Built-in wardrobes and staircases
- Bathroom and kitchen fitouts that are structural
- Driveways, paths, and fencing
- In-ground pools and retaining walls
For a property with a construction cost of $350,000, Division 43 alone is worth $8,750 per year in deductions.Division 40 — Plant and equipment (fixtures and fittings)
New properties come with new assets, and you can claim depreciation on all of them:
- Ovens, cooktops, and dishwashers
- Air conditioning systems
- Hot water systems
- Carpets and floating floors
- Blinds, curtains, and roller doors
- Ceiling fans, light fittings, and smoke alarms
Each asset is depreciated using the ATO's effective life ruling. Some assets — like carpets — depreciate faster than others, giving you larger deductions in the early years.Why new properties give more deductions
No plant and equipment restrictions. The 2017 budget changes that restricted Division 40 claims on second-hand residential properties do not apply to new properties. You can claim every asset at full value.
Higher construction costs. Newer properties are built to higher specifications and use more expensive materials. Higher construction cost = higher Division 43 deductions.
Full 40-year building life remaining. A new property gives you the full 40 years of capital works deductions rather than the remaining portion available on an older building.Do you need a depreciation schedule?
Yes. Even for a new property, a quantity surveyor will prepare a schedule that documents the construction cost breakdown and itemises every claimable asset. Your builder's contract alone is not sufficient — the ATO requires a proper depreciation schedule to substantiate your claims.
Other deductions in the first year
Beyond depreciation, in the first year you can also claim:
- Loan interest from settlement date
- Borrowing costs (pro-rated for the first year, then spread over five years)
- Property management fees and council rates from the date of first rental
Frequently Asked Questions
Can I claim depreciation before my tenant moves in?
Generally, deductions start from when the property is first available for rent, not from settlement date. The exception is borrowing costs, which begin from settlement.
Does buying off-the-plan affect my depreciation claims?
No. An off-the-plan purchase is still a new property and qualifies for full Division 40 and Division 43 depreciation. You should order your depreciation schedule once construction is complete and you receive the keys.
How much depreciation can I expect on a new property?
It varies by property type and construction quality, but a new residential property typically generates $10,000 to $25,000 in first-year depreciation deductions. A quantity surveyor can give you an estimate based on your specific property.
Can I still claim if the property is positively geared?
Yes. Depreciation deductions apply regardless of whether your property is positively or negatively geared. They reduce the net rental income, which reduces your tax on that income.
Written by Koste Team · Koste Chartered Quantity Surveyors · AIQS Member · RICS Member · TPB Registered · 1300 669 400 · info@koste.ai