I bought an established investment property — is a depreciation schedule still worth paying for?

You settled on an established house or unit, it's tenanted, and you're now working through the rental section of your return. Somewhere along the way someone told you to spend a few hundred dollars on a 'depreciation schedule' from a quantity surveyor because it pays for itself several times over. Someone else told you not to bother on a second-hand property, because 'the government cancelled depreciation in 2017'. Both of those sentences are half right. Which half applies to you decides whether the fee is worth paying.

One report, two completely different deductions

A depreciation schedule normally covers two things that the tax law treats separately. The first is the building — the structure, roof, walls, and things fixed to it or forming part of it, along with driveways, fences, retaining walls, garages and extensions. In tax language that is capital works, and it is deducted at a flat rate spread over decades. The second is the plant and equipment inside the building — carpet, blinds, the oven, the air conditioner, the hot water system — which is deducted as decline in value over each item's own effective life.

When people say depreciation was cancelled in 2017, they are talking about the second category only, and only for residential rental property. The first category was never touched.

The half that was switched off

Since 1 July 2017 you generally cannot claim decline in value on second-hand depreciating assets in a residential rental property. The ATO defines those as assets that were already installed ready for use, or used, by someone else — or by you in your own private residence. In practice that means everything that was sitting in the property on the day you bought it.

There are exceptions. You can still claim them if you bought the property, or the asset, before 7:30 pm (AEST) on 9 May 2017; if you acquired the asset before that moment and installed it before 1 July 2017; if you are carrying on a business of letting rental properties; if the owner is an excluded entity such as a company or a public unit trust; or if the property isn't used to provide residential accommodation — a commercial tenancy such as a doctor's surgery is outside these rules entirely. Turning your own home into a rental on or after 1 July 2017 falls on the wrong side of the line too: the appliances you were living with produce no deduction once the tenant moves in.

What is still claimable is anything new you buy for the property yourself. Replace the dishwasher, and that dishwasher depreciates normally, because you are the first to install it ready for use.

The half that survived — usually the larger one

Capital works are unaffected by any of the above. For a residential property, construction has to have started after 17 July 1985 to qualify at all. Where construction started between 18 July 1985 and 15 September 1987 the rate is 4% a year; from 16 September 1987 onwards it is 2.5% a year, claimable for 40 years from the date construction was completed. Some other categories of building attract 4% over 25 years.

The rate applies to the construction cost, not the purchase price — and that distinction is the whole reason the report exists. Take a hypothetical townhouse whose construction cost was $500,000 and was completed in 2005. At 2.5% that is $12,500 a year, and you claim only the portion of the year the property was producing income: if it was rented for 122 days of the financial year, the claim for that year is $12,500 × 122 ÷ 365, or $4,178. Nothing about that depends on whether you were the original owner.

It also covers work done by whoever owned the place before you. Major renovations, a room reworked, an extension, a carport, a retaining wall — all capital works, all on the same clock, all claimable by the current owner even though someone else paid for them. Preliminary costs such as architect, engineering and surveying fees and building permits form part of the construction expenditure too. And because anything fixed to or forming part of the building is treated as a construction expense rather than plant, a good deal of what a report lists sits on the surviving side of the 2017 rule rather than the dead side.

If you can't establish the actual construction cost — and buying an established property, you usually can't — the ATO accepts an estimate from a quantity surveyor or other independent qualified person. The fee you pay for that estimate is itself deductible.

Two things people read wrongly

The first is treating the report as the deduction. It isn't; it's evidence. To make the claim you still need the type of construction, the date construction started and finished, the construction cost, who carried out the work, and the period of the year the property was genuinely available for rent. A schedule that arrives without those details attached does not do the job, and the deduction can never exceed the actual construction expenditure.

The second is forgetting the other end. Capital works deductions you have claimed are excluded from the property's cost base for capital gains tax purposes, for property acquired after 7:30 pm on 13 May 1997. So a deduction taken each year reduces the cost base you subtract on sale, which means the benefit is about timing and rates rather than being free money. Worth knowing alongside that: the way capital gains are worked out changes for gains accruing from 1 July 2027 under the reforms passed in June 2026, which is a separate calculation again.

The unglamorous general version, current as at August 2026: before deciding, find out when the building was constructed. If construction started before 18 July 1985 and nobody has substantially renovated since, there may be very little for a report to find. If it was built after that, or renovated after that by any owner, the capital works figures are likely to be the substantial part — and they are the part the 2017 change did not touch. What you should not do is order a report expecting the appliance list to be the payoff on an established property, or skip one because you heard that list is now worthless.

This is general information rather than advice about your own property; the answer depends on the construction date, the construction cost, what has been done to the place since, and how it has been used. Our investment property calculator will show you how a deduction of a given size moves the cash-flow position on a rental, and getting capital works, repairs and depreciating assets into the right boxes is part of what our tax service for property investors does.