Top 15 Assets for Tax Depreciation in Australia 2025

Tax depreciation is a powerful tool for property investors and small businesses to boost cash flow and reduce assessable income by claiming deductions for the decline in value of eligible depreciating assets. By understanding how to calculate depreciation and applying the correct asset’s effective life, you can recover part of your investment cost over the expected period.

The Australian Taxation Office (ATO) allows these claims under two main categories: Division 40 (Plant and Equipment) for removable air conditioning assets, machinery, computers, and other assets, including kitchen appliances and lighting; and Division 43 (Capital Works) for structural features such as walls, roofs, slabs, fencing, and driveways. Understanding both asset categories and the asset category classifications helps you determine and maximise tax benefits while staying compliant with ATO regulations, guidelines, and the ATO Indigenous Badge, where applicable.

This guide highlights the top 15 assets for tax depreciation in Australia for 2025, including certain assets often missed that can add thousands in extra depreciation deductions each year. It also provides examples to assist businesses in optimising their claims.

Understanding Tax Depreciation and How It Works

Tax depreciation recognises the gradual asset’s decline in value due to wear and tear, age, obsolescence, and other factors affecting depreciating assets within an income-producing property or business. As these depreciating assets lose value over time, the Australian Taxation Office (ATO) allows investors and businesses to claim deductions for that decline.

There are two main categories of depreciation:

• Division 40 – Plant and Equipment: covers removable items such as air conditioning assets (excluding ducting and excluding chutes), carpets, kitchen appliances, blinds, lighting fixtures, and equipment with moving parts. These assets generally depreciate faster, providing higher deductions in the early years using the diminishing value method or prime cost method.

• Division 43 – Capital Works: applies to structural elements like walls, roofs, concrete slabs, pergolas, fencing, and driveways. These fixed assets depreciate at a fixed rate of 2.5% per year for up to 40 years.

A qualified quantity surveyor is required to prepare an ATO-compliant tax depreciation schedule. This report identifies every eligible asset, applies the correct asset’s effective life as defined by the ATO, and ensures all claims meet current tax legislation, industry standards, and the asset’s expected decline in value. The effective life method allows for a tailored approach to calculating depreciation based on usage, ensuring that deductions accurately reflect the wear and tear experienced by each asset. To determine the effective life of an asset, the ATO considers factors like physical life and industry use.

Capital Works and Construction Expenses

Capital works represent one of the most valuable components of a property depreciation claim. These deductions cover the structural and permanent features of a building, including construction, extensions, and renovations.

Under Division 43 of the Income Tax Assessment Act 1997, the Australian Taxation Office (ATO) allows investors to claim 2.5% per year for up to 40 years on eligible construction costs. This includes expenses for walls, roofs, concrete slabs, driveways, fencing, and professional fees related to building or improvement work.

To claim these deductions, investors must keep accurate records of all construction costs, such as invoices, contracts, and receipts. These documents assist businesses and quantity surveyors to prepare a comprehensive tax depreciation schedule, ensuring every eligible capital works item is included.

The Top 15 Assets for Tax Depreciation

1. Air Conditioning Units

Air conditioning assets, including condensing sets, evaporative coolers, and split systems (excluding ducting and chutes), are high-value plant and equipment assets with a short effective life, meaning they depreciate quickly. Investors and businesses can claim significant tax deductions early on, particularly for ducted units, using the simplified depreciation rules or general method. Air conditioning units experience constant wear and tear and are among the most rewarding assets to depreciate. These assets often qualify for accelerated deductions under temporary tax depreciation incentives.

2. Carpets and Floor Coverings

Carpets experience constant wear and tear, making them one of the most commonly claimed depreciating assets. The cost of purchasing carpets is considered an expense for depreciation purposes, especially for rental or Airbnb properties. Carpets are typically valued around $3,800 and wear out quickly in rental properties, making them valuable for depreciation. As removable items, they fall under Division 40 and typically depreciate faster than structural features, providing valuable tax deductions. They can also be included in a low value pool if their cost is below the set annual rate, allowing for simplified depreciation.

3. Blinds and Curtains

Often overlooked, window furnishings such as blinds and curtains provide strong early depreciation deductions. Their relatively short effective life allows investors and business owners to claim a higher percentage each year, contributing to maximising tax benefits.

4. Lighting Fixtures

Lighting elements, including downlights, pendants, and ceiling lights, qualify for plant and equipment deductions. Replacements and upgrades can also be added to a depreciation schedule for additional claims.

5. Ovens

Ovens are a common kitchen asset claimed under Division 40 (Plant and Equipment). With an effective life of about 12 years, they depreciate steadily due to heat exposure and frequent use.
Replacing or upgrading an oven resets its depreciation cycle, allowing new claims to begin. Including ovens in a professional depreciation schedule helps property investors maximise deductions and stay ATO compliant.

6. Dishwashers

Dishwashers fall under Division 40 (Plant and Equipment) and typically have an 8-year effective life.
Frequent use and moisture exposure make them quick to depreciate, offering strong early-year deductions.
Each new dishwasher installed can be added as a separate asset, ensuring all eligible claims are captured for maximum tax savings.

7. Hot Water Systems

Hot water systems, whether electric, gas, or solar, have a limited lifespan and can offer substantial deductions under Division 40. Hot water systems depreciate rapidly due to continuous use and exposure to water and heat. Replacing an older unit can restart depreciation on the new asset, increasing claimable deductions.

8. Garage Door Motors

Often forgotten, garage door motors are classified as mechanical equipment with moving parts and qualify for accelerated depreciation. They are easy to identify and add noticeable value to a depreciation schedule, helping you claim more money.

9. Bathroom Accessories

Items such as mirrors, exhaust fans, heated towel rails, shower caddies, and soap holders are all depreciable. Although individually low cost, combined they can make a meaningful contribution to annual claims within your tax depreciation schedule.

10. Electrical Devices

Electrical fixtures such as smoke detectors and fire sensors are important functional components within investment properties. These assets fall under Division 40 (Plant and Equipment) and typically have shorter effective lives, allowing investors to claim faster depreciation. Safety and electrical devices such as detector systems have short effective lives and are replaced regularly.

Because electrical devices are frequently replaced or upgraded, they offer consistent opportunities for new deductions each time a replacement occurs. Including them in your depreciation schedule ensures every eligible electrical installation is captured and claimed correctly in line with ATO guidelines.

11. Lifts

Lifts are high-value mechanical assets commonly found in apartment complexes and multi-level commercial buildings. They fall under Division 40 (Plant and Equipment) and can deliver substantial deductions due to their cost and regular maintenance requirements. Including lifts in your depreciation schedule ensures accurate valuation and long-term deduction benefits.

12. Mechanical Ventilation

Mechanical ventilation systems, such as exhaust fans and ducted ventilation units, play a vital role in maintaining air quality and comfort. As they are replaced or upgraded frequently, they provide consistent opportunities for depreciation claims over time.

13. Fire Pumps

Fire pumps, including diesel and electric, are essential safety systems required in many residential and commercial properties. They qualify for deductions under Division 40 (Plant and Equipment) and have high initial costs and ongoing maintenance. Depreciating these systems helps offset operational expenses while ensuring compliance with fire safety regulations.

14. Intercom Systems

Intercom systems enhance communication and security within properties and are classified as Division 40 (Plant and Equipment) assets. They include both audio and video systems, often connected to door access controls. Due to rapid technological advancement, intercom systems are frequently upgraded, allowing for regular depreciation claims on new installations.

15. Security Systems

Security systems, including alarms, cameras, and motion sensors, qualify as depreciable assets under Division 40 (Plant and Equipment). These assets often require periodic upgrades, creating ongoing opportunities for deductions. Claiming depreciation on security systems not only improves tax efficiency but also enhances property safety and tenant confidence.

How to Claim Depreciation on These Assets

Claiming depreciation correctly ensures you receive every tax deduction you’re entitled to while maintaining compliance with ATO guidelines. Professional support helps capture and value each eligible asset accurately.

Engage a Qualified Quantity Surveyor

Only qualified quantity surveyors are recognised by the ATO to estimate construction costs and asset values. A professional inspection ensures no item is overlooked and that all values comply with current legislation and the asset’s effective life requirements.

Obtain an ATO-Compliant Depreciation Schedule

A tax depreciation schedule lists all Division 40 and Division 43 assets with annual deductions. It serves as a roadmap for future claims and ensures accuracy across financial years.

Provide the Schedule to Your Accountant

Your accountant uses the depreciation schedule to include deductions in your tax return, ensuring compliance and maximised returns.

Update After Renovations or Upgrades

Whenever you add or replace assets, your schedule should be updated to include new items from their installed ready date.

Importance of Accurate Records

Accurate records are vital for maximising deductions and meeting ATO compliance. Investors should keep invoices, receipts, and contracts for at least five years. Maintaining accurate records of asset purchases and installation dates maximises the benefits of tax depreciation. Detailed documentation assists businesses and quantity surveyors in capturing every asset, simplifying updates after renovations, and ensuring claims reflect the asset’s decline in value.

Common Mistakes to Avoid When Claiming Depreciation

Not Getting a Professional Depreciation Schedule

Only a qualified quantity surveyor can accurately prepare an ATO-compliant schedule.

Overlooking Smaller Assets

Items such as fans, smoke detectors, blinds, and shower caddies can add up to significant value when pooled.

Forgetting to Update After Renovations

Update your schedule when replacing or adding assets to avoid missing deductions.

Assuming Older Properties Don’t Qualify

Even older properties can claim plant and equipment or capital works deductions.

Ignoring Legislative Changes

ATO depreciation rules evolve over time, so professional advice keeps claims compliant.

Frequently Asked Questions

1. What assets can be depreciated in an investment property?

You can claim depreciation on most assets that experience wear and tear while producing income. This includes removable items under Division 40 and structural features under Division 43. Note that intangible depreciating assets may also qualify in some cases, depending on their nature and use. Examples of common depreciating assets include machinery, furniture, and computers.

2. Can I claim depreciation on second-hand assets?

For residential properties bought after 9 May 2017, investors are unable to claim depreciation on previously used plant and equipment. However, brand-new or newly installed assets in renovated properties remain eligible for depreciation deductions.

3. How often should I update my depreciation schedule?

Update your schedule whenever new assets are added or old ones are replaced to keep claims accurate. Regularly reviewing and updating your depreciation schedule after renovations helps ensure no deductions are missed.

4. Do older properties qualify for tax depreciation?

Yes, especially if they have undergone renovations or improvements that qualify for capital works deductions.

5. Why do I need a qualified quantity surveyor?

Only a registered quantity surveyor can estimate construction costs and asset values under ATO standards, ensuring your claims comply with tax legislation and reflect the asset’s effective life and decline in value.

6. How does a tax depreciation schedule improve cash flow?

It allows investors to claim annual deductions for asset wear and tear, reducing taxable income and increasing after-tax cash flow.

Claiming Depreciation for the Right Assets and Next Steps

Tax depreciation helps improve property cash flow and build wealth. By identifying and claiming deductions on the right assets, investors can reduce taxable income and maximise after-tax returns.

A professional tax depreciation schedule ensures no eligible item is missed and all claims meet ATO requirements. Speak with the experts at Duo Tax to arrange a compliant report tailored to your property and uncover hidden deductions today.