Understanding Depreciation: Why Brand-New Properties Offer Tax Advantages
When it comes to building long-term wealth through real estate, tax efficiency is a crucial part of the strategy. One of the biggest advantages of investing in brand-new properties is the ability to claim property depreciation – a benefit that can significantly reduce your taxable income and improve cash flow.
At Crest Property Investments, we help clients understand how depreciation works and why it’s a key factor in choosing new over established homes. Here’s what you need to know.
What is Property Depreciation?
Property depreciation is a tax deduction that allows investors to account for the decline in value of a building and its fixtures over time. Just like machinery or vehicles used for business, residential investment properties also wear out, and the ATO allows you to claim this wear and tear as a deduction.
There are two main types of depreciation:
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Capital Works (Division 43): Covers the building structure—such as walls, flooring, roofing, and concrete. For eligible properties, this can be claimed at 2.5% per year over 40 years.
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Plant and Equipment (Division 40): Includes removable fixtures and fittings like carpets, appliances, air conditioning units, and window blinds. These items can often be depreciated at a faster rate depending on their lifespan.
Why Brand-New Properties Offer Greater Benefits
While both new and old properties are eligible for capital works deductions, only brand-new properties allow investors to claim both types of depreciation in full.
Since July 2017, the ATO has restricted investors from claiming depreciation on used plant and equipment in second-hand properties. This change significantly reduced the depreciation benefits available for established homes.
Here’s how new properties stand out:
- Maximised deductions: Everything is new – so all eligible items can be claimed.
- Higher depreciation schedules: In the first 5-10 years, new builds often generate thousands of dollars in deductions annually.
- Improved cash flow: Lower taxable income means more money in your pocket each year.
An Example of Depreciation in Action
Let’s say you purchase a brand-new investment property for $650,000. A qualified quantity surveyor estimates that you can claim:
- $6,500 per year in capital works
- $4,000 per year in plant and equipment (initial years)
That’s $10,500 in deductions annually, which could reduce your tax bill significantly – especially if you’re in a higher income bracket.
Do You Need a Depreciation Schedule?
Yes. To claim depreciation, you’ll need a tax depreciation schedule prepared by a qualified quantity surveyor. This one-off report outlines all the deductible items in your property and ensures your accountant can apply the correct deductions each financial year.
At Crest Property Investments, we work with reputable quantity surveyors and can coordinate this as part of our concierge service for clients purchasing new or off-the-plan properties.
Final Thoughts
Depreciation is one of the most powerful, yet often overlooked, tax tools for property investors. It’s one of the key reasons many of our clients choose brand-new properties – not just for the low maintenance and modern design, but for the strong tax efficiency they offer.
If you’re looking to grow your property portfolio while minimising your annual tax burden, a brand-new investment property might be the right next step.
If you’d like to learn more about property investment, please feel free to contact us. We specialise in sourcing brand new and off the plan properties for buyers. We also do not charge fees to buyers! We would welcome the opportunity to help with your property purchase.
Our YouTube channel and Market Insights are also a great place to gain more tips. They provide a wealth of information to assist you with many areas relating to property.
While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you want to learn more please contact us. We welcome the opportunity to assist you.
August 2025
