Buyer's guide / Depreciation
Off the plan depreciation: what you can claim on a new apartment.
A new apartment is one of the few purchases where the tax office lets you claim the fittings as well as the building. This guide sets out both deductions, the rule that makes new property different from second-hand, the effective lives of the things in the apartment, and who can put the numbers on paper, all from the ATO's own pages. It is general information, not tax advice; a registered tax agent applies it to you.
Published by Off Plan Properties. When you are ready to decide, our property team, including licensed real estate agent Breige Quinn, is a call away.
The short answer
Two deductions, one report, and a first-owner advantage.
A new apartment bought off the plan and rented out gives you two depreciation claims. The building itself is claimed as capital works at 2.5% a year for 40 years. The fittings, from carpet to the oven, are claimed as depreciating assets over their effective lives. A second-hand apartment gives you only the first, because since 2017 used fittings are no longer deductible to a later owner. A quantity surveyor's report sets the figures for both. None of this is tax advice; it is what the ATO's own pages say, with the dates we read them.
2.5% of the construction cost each year for 40 years from completion, for buildings started after 15 September 1987. Reduces your CGT cost base (ATO, updated 22 June 2026).
New assets bought with a newly built property, where no one was previously entitled to a deduction and either no one lived there before you or you acquired it within 6 months of completion (ATO, updated 21 May 2026).
The building
Capital works at 2.5% a year.
Capital works includes expenses for building the property as well as structural improvements, alterations and extensions. Preliminary expenses such as architect fees, engineering fees, surveying fees, foundation excavation expenses and costs of building permits also form part of construction expenses. An asset fixed to or part of the building is generally capital works, not a depreciating asset (ATO, updated 21 May 2026).
Any building intended for residential use started on or after 16 September 1987 is claimed at 2.5% a year, which means 40 years of deductions. As a general rule you can claim for 40 years from the date construction was completed, and only once construction is completed (ATO, updated 22 June 2026).
The deduction is based on the construction cost, not the purchase price. The purchase price of the building and land, the insured cost and the replacement cost cannot be used (ATO, updated 22 June 2026). Capital works deductions can't exceed your construction expenses (ATO, updated 21 May 2026). On an apartment the construction cost is what the developer spent on your share of the building, which is why you need an estimate.
Only once construction has been fully completed, and only while the property is rented or genuinely available for rent on commercial terms (ATO, updated 21 May 2026). For an off the plan purchase that is after settlement, once it is listed for lease.
Capital works expenses form part of the cost base of your property. If you claim a capital works deduction, you will need to take this into account when you work out your capital gain or loss (ATO, updated 22 June 2026).
The fittings
Depreciating assets, and why new matters.
Items that can be described as plant and don't form part of the premises: separately identifiable, unlikely to be permanent, replaced within a relatively short period, and not part of the structure. Examples: floating timber flooring, carpets, curtains, appliances like a washing machine or fridge, furniture (ATO, updated 21 May 2026).
You can claim the decline in value of new depreciating assets. This includes depreciating assets purchased with a newly built or substantially renovated property, if no one was previously entitled to a deduction for the decline in value, and either no one resided at the property before you acquired it, or the asset was installed for use, or used at the property, and you acquired the property within 6 months of it being newly built (ATO, updated 21 May 2026).
The ATO's example: Kerrie purchased a unit off the plan from a developer as an investment; it was new and no one lived in it before. The property included depreciating assets such as curtains and furniture installed before settlement. Kerrie engages a qualified quantity surveyor to get a full list, and is entitled to claim deductions for decline in value because no one has lived in it before she purchased it (ATO, updated 21 May 2026).
Kate bought an apartment from a developer 4 months after completion, already tenanted. She can still claim, because no one could claim the assets (they were the developer's trading stock) and the property was supplied within 6 months of being built. Had she signed after 6 months, she could not have claimed any of the assets already in it (ATO, updated 21 May 2026).
In most cases you can't claim a deduction for second-hand depreciating assets after 1 July 2017: assets already installed or used by another entity, in your private residence, or for a non-taxable purpose. The exception is an asset you bought before 7:30pm on 9 May 2017 and installed before 1 July 2017 (ATO, updated 22 June 2026).
Assets costing $300 or less can be claimed in full in the year you first use them, unless they are part of a set that together costs more than $300. Assets costing less than $1,000 can be grouped in a low-value pool and depreciated together at a diminishing value rate of 37.5% (ATO, updated 21 May 2026; Rental properties guide 2026).
Diminishing value claims a constant portion of the remaining value, so higher deductions early; prime cost claims a uniform amount of the original value each year. Diminishing value: cost × days held ÷ 365 × 200% ÷ effective life. Prime cost: cost × days held ÷ 365 × 100% ÷ effective life. You can use the Commissioner's effective life or your own reasonable estimate (ATO, updated 21 May 2026).
| Asset | Effective life |
|---|---|
| Carpet | 8 years |
| Floating timber flooring | 15 years |
| Split system air conditioning up to 20 kW | 10 years |
| Dishwasher | 8 years |
| Oven | 12 years |
| Range hood | 12 years |
| Refrigerator | 12 years |
| Washing machine | 8 years |
| Clothes dryer | 7 years |
| Hot water system, electric or gas | 12 years |
| Internal window blinds | 10 years |
| Curtains | 6 years |
| Ceiling fans | 5 years |
The report
Who can put a number on it.
You will not know the developer's construction cost for your share of the building. The ATO accepts an estimate: if it isn't possible to determine the actual construction costs, you can obtain an estimate from a quantity surveyor or other independent qualified person, and you can claim a deduction for the fees you pay to obtain it (ATO, updated 22 June 2026). Ruling TR 97/25 lists who qualifies: a quantity surveyor with expertise in the relevant type of construction, a clerk of works, a supervising architect, or a builder experienced in estimating costs of similar projects. It adds that valuers, real estate agents, accountants and solicitors generally have neither the relevant qualifications nor experience, and that published building cost guides are not accepted unless used merely as a guide by a qualified person.
The same report can include a schedule of depreciable assets, which is the list you claim the fittings from. The ATO recommends keeping at least a spreadsheet of depreciating assets, and says a quantity surveyor can prepare a report at the time a rental property is purchased. Obtain it as soon as possible after settlement; these reports can take a long time to prepare (ATO, updated 22 June 2026).
Records you must keep for capital works: the type of construction, the dates construction commenced and was completed, the construction cost (not the purchase price), who carried out the work, and the period the property was used to produce income (ATO, updated 22 June 2026).
When you sell
Depreciation on fittings is a first-owner benefit.
The ATO's Rental properties guide 2026 gives the example of Tim, who bought two apartments 4 months after they were built. If Tim sells the apartments, the next owner can't claim deductions for the decline in value of the existing depreciating assets, in either the apartments or the shared areas. That is one reason a new apartment carries a tax advantage that an established one does not, and one reason resale buyers should not price in a depreciation schedule they will not get. See off the plan vs completed apartments for the rest of the comparison, and the investor tax and costs guide for how depreciation sits with negative gearing and the 2027 rules.
Questions
Answered, with sources.
Can I claim depreciation on an off the plan apartment?
Yes, on both the building and the fittings, provided it is rented or genuinely available for rent. The building is claimed as capital works at 2.5% a year of the construction cost for 40 years from completion, since construction started after 15 September 1987 (ATO, updated 22 June 2026). The fittings are depreciating assets, and the ATO's own example is an investor who bought a unit off the plan, new and never lived in, and can claim the decline in value of the curtains and furniture installed before settlement (ATO, updated 21 May 2026).
What is the difference between capital works and depreciating assets?
Capital works are the building and anything fixed to it: construction costs, structural improvements, and preliminary costs like architect and engineering fees. They are claimed at 2.5% a year over 40 years and cannot exceed the construction cost (ATO, updated 21 May 2026). Depreciating assets are items that can be described as plant and don't form part of the premises: carpets, floating timber flooring, curtains, appliances and furniture. Each is claimed over its own effective life (ATO, updated 21 May 2026).
Why can't I claim the fittings in a second-hand apartment?
Because of the 2017 change. In most cases you can't claim a deduction for second-hand depreciating assets after 1 July 2017: assets already used by another entity, in a private residence, or for a non-taxable purpose. The only way through for a used asset is if you bought it before 7:30pm on 9 May 2017 and installed it before 1 July 2017 (ATO, updated 22 June 2026). A new apartment avoids this because no one was previously entitled to a deduction and no one lived there before you, or you acquired it within 6 months of it being built (ATO, updated 21 May 2026).
Do I need a quantity surveyor?
Usually, yes. If it isn't possible to determine the actual construction costs, you can obtain an estimate from a quantity surveyor or other independent qualified person, and the fee is deductible (ATO, updated 22 June 2026). The ATO's ruling TR 97/25 accepts an estimate from an appropriately qualified person such as a quantity surveyor, a clerk of works, a supervising architect or an experienced builder, and says valuers, real estate agents, accountants and solicitors generally are not qualified to make it. Published building cost guides are not accepted on their own. A quantity surveyor's report can also schedule the depreciating assets.
What happens to depreciation when I sell?
Two things. The capital works you claimed reduce your cost base for capital gains tax, so you must take it into account when working out your capital gain or loss (ATO, updated 22 June 2026). And the next owner cannot claim the fittings: the ATO's Example 23 says if Tim sells the apartments, the next owner can't claim deductions for the decline in value of the existing depreciating assets, in either the apartments or the shared areas (Rental properties guide 2026). Depreciation on fittings is a first-owner benefit.
Working out whether a specific development stacks up as an investment? Run the negative gearing calculator, or ask the AI adviser about any project on the site.
Sources
- ATO: Capital expenses (updated 21 May 2026)
- ATO: Work out your capital works deductions (updated 22 June 2026)
- ATO: Depreciating assets in rental properties (updated 21 May 2026)
- ATO: Second-hand depreciating assets (updated 22 June 2026)
- ATO: Rental properties guide 2026 (current at 1 June 2026)
- ATO: TR 97/25, deduction for capital expenditure on construction of income producing capital works
- ATO: Income Tax Assessment (Effective Life of Depreciating Assets) Determination 2025, LI 2025/20
- ATO: Effective life determinations, rulings and law (updated 17 November 2025)