How to Claim Depreciation on an Investment Property – 2026 Guide

You might think depreciation is just a tax‑relief trick for landlords, but in 2026 the numbers show it can shave $10,000 off your taxable income in the very first year if you own a $500,000 building. That’s a 2 % claim on the building’s cost, and it’s available to every investor who meets the ATO’s criteria. Below, I break down how to maximise that deduction, avoid common pitfalls, and keep your books clean and compliant.

Why Depreciation Matters

Depreciation on an investment property is GST‑free – the ATO treats it as a tax‑deductible expense, unlike capital works on residential units which are subject to GST. That means you can claim a straight‑line 2 % rate on the building (excluding land) each year, and, if you qualify, a 5 % rate on depreciating assets like appliances and flooring.

In my experience, most landlords overlook the instant asset write‑off and the value of a professional depreciation study. Missing out on these can cost you thousands in lost tax relief.

1. The Basics: What You Can Claim

Item	Depreciation Rate	Example	First‑Year Claim
Building (excluding land)	2 % (straight‑line)	$500,000 → $10,000	$10,000
Depreciating assets (e.g., appliances, flooring)	5 % (straight‑line)	$20,000 → $1,000	$1,000
Instant asset write‑off	100 % (if <$30,000)	$25,000 of appliances	$25,000

Key point: Land is non‑depreciable. Claiming it inflates your deduction and can trigger an audit.

2. The Cost of Doing It Right

Item	2026 AUD Price
Depreciation Study (full)	$1,200 AUD
Tax Agent (basic depreciation claim)	$350 AUD
Xero Depreciation Add‑on	$60 AUD/month
TaxCalc Depreciation Software (annual licence)	$120 AUD
Property Management Software (basic plan)	$250 AUD/year
Property Insurance (3‑bedroom, $300,000 value)	$1,200 AUD/year
Bookkeeping Service (monthly)	$500 AUD/month

Pro Tip: Bundle your depreciation study with a comprehensive property insurance policy. The ATO requires insurance for certain fixtures to qualify for the full depreciation claim. A single $1,200 AUD policy can cover both needs and reduce your overall costs.

3. Common Mistakes and How to Avoid Them

Mistake	Why It’s Problematic
Claiming land depreciation	Land is non‑depreciable; claiming it inflates the deduction and triggers an audit.
Skipping the instant asset write‑off	Over‑50 % of owners miss the first‑year write‑off on items <$30,000, losing immediate tax relief.
Using outdated depreciation tables	The ATO updates depreciation tables quarterly; using old tables can under‑ or over‑estimate the claim.
Not reconciling with capital gains tax (CGT)	A large depreciation claim can reduce the CGT discount in the sale year, resulting in a higher tax bill.

I recommend a quarterly review of your depreciation tables. The ATO publishes new rates every three months, and staying up‑to‑date can save you both time and money.

4. Expert Tips for Maximising Your Claim

Pro Tip: Maximise the instant asset write‑off – claim all items costing <$30,000 in year 1. For example, a $25,000 appliance bundle gives you a $25,000 deduction immediately.

Pro Tip: Use a professional depreciation study – A study can add up to $5,000 extra in deductions versus a standard claim. Even if you’re a seasoned investor, a fresh study ensures you capture every depreciating asset correctly.

Other useful strategies:

Schedule a quarterly review of depreciation tables to capture the latest ATO rates.
Bundle with property insurance – ensures you meet the ATO’s requirement for certain fixtures.
Align with superannuation – the “deferred tax” strategy (available until 2028) lets you use the depreciation claim to boost your super contributions.

5. How to Claim: Step‑by‑Step

Gather Your Documentation
- Purchase receipts, invoices, and the building’s cost breakdown (excluding land).
- Identify all depreciating assets and their purchase dates.
Decide on a Claim Method
- Standard claim: Use the ATO’s depreciation tables and claim the 2 % on the building plus 5 % on assets.
- Depreciation study: Hire a qualified quantity surveyor to produce a detailed study. This often yields higher deductions.
Apply the Instant Asset Write‑off
- Identify all items <$30,000. Claim the full amount in the first year.
- Example: $25,000 of appliances → $25,000 deduction.
Calculate the Annual Depreciation
- Building: 2 % × (cost of building).
- Assets: 5 % × (cost of assets).
- Add instant write‑off to the total.
Submit with Your Tax Return
- Use your tax agent or accounting software (Xero add‑on, TaxCalc, etc.) to include the depreciation claim.
- Keep detailed records; the ATO may audit you.

6. Risk and Considerations

Audit Risk: Over‑claiming or claiming land depreciation can trigger an audit. Keep accurate records and avoid overstating claims.
CGT Implications: A large depreciation claim reduces the CGT discount when you sell the property, potentially increasing your capital gains tax liability. Plan ahead.
Tax Law Changes: The ATO updates depreciation tables quarterly. Staying current is essential to avoid under‑claiming or over‑claiming.

7. Internal Resources

These links provide deeper context on how depreciation fits into the broader tax strategy for landlords.

8. Frequently Asked Questions

Question	Answer
Q1: Can I claim depreciation on land?	No. Land is considered non‑depreciable. Claiming it will lead to an audit.
Q2: How often do I need to update my depreciation tables?	The ATO publishes new tables every quarter. It’s best to review them quarterly to keep your claims accurate.
Q3: What if my property has been owned for more than 5 years?	The straight‑line depreciation rates still apply, but you must recalculate the remaining life. A professional study can help.
Q4: Do I need to have insurance to claim depreciation on fixtures?	Yes. For certain fixtures, the ATO requires a comprehensive property insurance policy to validate the claim.

9. Bottom Line

Depreciation is a powerful tax‑planning tool for investment‑property owners in 2026. By:

Claiming the instant asset write‑off on all items <$30,000,
Using a professional depreciation study to capture every asset,
Staying current with quarterly depreciation tables, and
Bundling with property insurance to satisfy ATO requirements,

you can maximise your deductions and reduce your taxable income by up to $15,000 in the first year alone.

What I recommend: If you’re a first‑time landlord or have a complex property, invest in a full depreciation study ($1,200 AUD) and pair it with a comprehensive insurance policy. The upfront cost is offset by the tax relief you’ll receive and the peace of mind that your claim is accurate and audit‑ready.

10. Amazon Resources

Depreciation Study – https://www.amazon.com.au/s?k=depreciation+study&tag=owlno-22
Instant Asset Write‑off – https://www.amazon.com.au/s?k=instant+asset+write+off&tag=owlno-22
Property Depreciation Software – https://www.amazon.com.au/s?k=property+depreciation+software&tag=owlno-22
Tax Agent Services – https://www.amazon.com.au/s?k=tax+agent+services&tag=owlno-22

These links provide tools and resources to help you manage depreciation more efficiently.

Disclaimer: The information provided here is general in nature and not tailored to your personal circumstances. It does not constitute professional financial, tax, or legal advice. Always consult a qualified professional before making tax‑related decisions.

About the author: Claire Dawson is a Personal Finance Contributor at Owlno. Claire writes about budgeting, investing, and financial planning for everyday Australians. Her content focuses on practical strategies that work in the current Australian economic environment. This content is general in nature and not personal financial advice.

How to Claim Depreciation on an Investment Property – 2026 Guide