End-of-Year Tax Guide 2025: Maximising Depreciation On Your Investment Property

Australian property investors have a crucial opportunity to significantly boost their cash flow—and it all comes down to tax depreciation. Depreciation is often referred to as a ‘non-cash deduction’ because you don’t spend money on it; you simply claim the wear and tear on your investment property.

For the 2025 tax year, ensuring you have accurate depreciation figures is essential. Here’s why depreciation is vital and how to maximise your claims.

Depreciation is the second-largest tax deduction available to property investors, right after interest repayments. It reduces your taxable income, potentially moving you into a lower tax bracket and increasing the money you keep in your pocket.

A property generally depreciates in two categories:

1. Division 40 (Plant & Equipment): Easily removable assets like air conditioners, carpets, blinds, hot water systems, and appliances.
2. Division 43 (Capital Works): The building’s structure and items permanently fixed to it, such as brickwork, concrete, roofing, and structural improvements.

While the core rules remain stable, it’s vital to remember the changes introduced in 2017 regarding second-hand assets:

• Residential investors: If you purchased a second-hand residential property after May 9, 2017, you generally cannot claim depreciation on existing Division 40 (Plant & Equipment) assets.
  • Example: If the previous owner installed the dishwasher, you cannot claim it. If you buy and install a new dishwasher, you can claim it.
• New properties and Capital Works: The good news is that claims for Capital Works (Division 43) and all new assets you install (regardless of the property’s age) remain fully claimable.

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3 Steps To Maximise Your 2025 Claim:

1. Order or update your Quantity Surveyor Report (Tax Depreciation Schedule)

The ATO requires a qualified Quantity Surveyor (QS) to calculate Capital Works deductions (Division 43). If you don’t have a Tax Depreciation Schedule (TDS), you are leaving money on the table.

• A quality TDS details all depreciable assets and structural costs, is 100% tax-deductible, and lasts for the property’s lifetime (40 years).
• Crucially: If you have made any renovations or added new assets during the 2024-2025 financial year (like new appliances or hot water systems), notify your QS so they can update your report.

2. Claim all minor assets under $300

Take advantage of the immediate write-off rule for low-cost assets. Any eligible removable asset (Division 40) purchased for less than $300 can typically be written off entirely in the year of purchase, rather than depreciated over several years. This is a simple way to boost your deduction immediately.

3. Review scrapped assets

Did you throw out the old carpet, replace the stove, or upgrade the hot water system this year? You may be entitled to a Scrapping Deduction.

When an old asset is removed before the end of its effective life, the remaining value that was yet to be depreciated can be claimed as a 100% deduction in that financial year. This is one of the most overlooked deductions when investors renovate!

This post is for general information only and shouldn’t be taken as personal financial advice. Everyone’s situation is different, so chat to a qualified professional before making financial decisions or get in touch at turnerre.com.au!