What Is a Building Depreciation Report?
- Propti
- Jan 19
- 3 min read
A building depreciation report is a specialised tax document that allows property investors to claim depreciation deductions on the structural components of an investment property. It focuses on the decline in value of the building itself and its permanent improvements over time.
Prepared by a qualified quantity surveyor, a building depreciation report is an essential part of a broader property or tax depreciation report, and is relied upon by accountants to calculate accurate, ATO-compliant deductions.
What Is Building Depreciation?
Building depreciation relates to the capital works component of a property under Division 43 of the Australian tax legislation. It applies to the structural elements of a building and certain fixed improvements.
In most cases, building depreciation is claimed at a rate of 2.5% per year over 40 years, starting from the date construction was completed.
What Does a Building Depreciation Report Include?
A professionally prepared building depreciation report will typically include:
Construction date and eligibility assessment
Capital works valuation
Identification of structural components
Annual building depreciation deductions
Long-term depreciation schedules
ATO-compliant calculations
Quantity surveyor certification
A Propti building depreciation report is designed so accountants can apply the figures directly without needing further clarification.
What Can Be Claimed in a Building Depreciation Report?
Examples of claimable capital works include:
Foundations and concrete slabs
Walls, floors, and roofing
Fixed cabinetry and joinery
Bathrooms and kitchens
Structural renovations and extensions
Retaining walls and driveways
These items form the core of building depreciation and often represent the largest long-term deduction available to property investors.
Who Needs a Building Depreciation Report?
You may benefit from a building depreciation report if you own:
A residential investment property
A commercial or industrial property
A newly built or off-the-plan property
An older property with renovations
A property held within an SMSF
Even properties constructed decades ago may still be eligible for building depreciation where qualifying capital works were completed after 1985.
Is a Building Depreciation Report the Same as a Full Depreciation Report?
Not exactly.
A building depreciation report focuses solely on capital works (Division 43).A full tax depreciation report includes both:
Building depreciation, and
Plant and equipment depreciation (Division 40)
Many investors choose a full depreciation report to maximise deductions, but a building depreciation report remains valuable where plant and equipment claims are limited.
Do I Need a Quantity Surveyor?
Yes. The ATO requires building depreciation to be calculated by a qualified quantity surveyor or suitably qualified professional.
Accountants rely on these reports to ensure claims are accurate and supported by appropriate evidence.
How Long Does a Building Depreciation Report Last?
Building depreciation reports generally apply for up to 40 years from the completion of eligible construction. Once prepared, the same report can be used each year unless:
Major structural renovations occur
The property’s use changes
Ownership structure changes
If renovations are completed, an updated report may be required to capture additional capital works.
Is a Building Depreciation Report Worth It?
For most investors, yes. Building depreciation often delivers consistent deductions every year, even on older properties.
Because these deductions are non-cash expenses, they can significantly improve after-tax cash flow over the long term.
How to Get a Building Depreciation Report
The process typically involves:
Providing property details
Site inspection (if required)
Capital works assessment
Delivery of an ATO-compliant depreciation report
You can order a building depreciation report through Propti, with reports prepared specifically for property investors, accountants, and SMSF trustees.
Final Thoughts
A building depreciation report is a powerful tax tool that helps investors unlock legitimate deductions tied to the structure of an investment property. Without one, significant long-term tax benefits may be missed.
If you own an investment property, a professionally prepared building depreciation report should form part of your overall tax strategy.
