What Is a Tax Depreciation Report?

A tax depreciation report is a detailed document used by property investors to legally claim depreciation deductions on an investment property. Prepared by a qualified quantity surveyor, it outlines how much wear and tear can be claimed each financial year on the building and its eligible assets.

For many investors, a tax depreciation report is one of the most effective ways to improve cash flow and reduce taxable income — yet it’s often overlooked.

What Is Depreciation in Property Investing?

Depreciation reflects the natural decline in value of a property and its fixtures over time. The Australian Tax Office (ATO) allows investors to claim this decline as a tax deduction, even though no cash expense is incurred.

There are two main types of depreciation:

1. Capital Works Allowance (Division 43)

This applies to the building structure and permanent improvements, such as:

• Walls, floors, and roofs

• Fixed cabinetry

• Concrete driveways

• Structural renovations

Typically claimed at 2.5% per year over 40 years.

2. Plant and Equipment (Division 40)

This covers removable or mechanical assets, such as:

• Air conditioners

• Hot water systems

• Ovens and dishwashers

• Carpets and blinds

Each item has its own effective life set by the ATO.

What Is Included in a Tax Depreciation Report?

A professionally prepared tax depreciation report will include:

• A site inspection of the property

• A full asset register

• Annual depreciation schedules (often 40 years)

• Separate deductions for building and plant & equipment

• ATO-compliant calculations ready for your accountant

A Propti depreciation report, for example, is designed so accountants can plug the figures directly into a tax return without further interpretation.

Who Needs a Tax Depreciation Report?

You may benefit from a tax depreciation report if you own:

• A residential investment property

• A commercial or industrial property

• A new or recently renovated property

• An SMSF-held property

• A property purchased second-hand (in many cases)

Even older properties can still generate meaningful depreciation, particularly where renovations or upgrades have occurred.

Do I Need a Quantity Surveyor?

Yes. The ATO requires depreciation reports to be prepared by a qualified quantity surveyor or another suitably qualified professional.

Accountants cannot estimate depreciation themselves — they rely on reports prepared by specialists. This is why ordering a compliant depreciation report is essential before claiming deductions.

How Long Does a Tax Depreciation Report Last?

A depreciation report typically lasts for the effective life of the property (up to 40 years). Once prepared, it can be used year after year unless:

• Major renovations are completed

• The property use changes

• Ownership structure changes

If renovations occur, an updated depreciation report may be required to capture the new assets.

How Much Can a Tax Depreciation Report Save Me?

Savings vary depending on the property type, age, and value, but investors often claim:

• Thousands of dollars per year in depreciation

• Tens of thousands over the life of the property

Because depreciation is a non-cash deduction, it can significantly improve after-tax cash flow.

How to Get a Tax Depreciation Report

Ordering a tax depreciation report is straightforward:

1. Provide basic property details

2. Arrange a site inspection (if required)

3. Receive an ATO-compliant depreciation schedule

4. Give the report to your accountant

You can order a property tax depreciation report through Propti, with reports designed specifically for investor and accountant use.

Final Thoughts

A tax depreciation report is not just a compliance document — it’s a cash flow tool for property investors. Without one, you may be leaving legitimate tax deductions unclaimed every year.

If you own an investment property, obtaining a professionally prepared depreciation report should be part of your standard tax strategy.

Depreciation Report