A new investment property usually gives you bigger tax deductions than an established one, for two reasons. The building itself can be written off over 40 years. And because everything inside is new, you can claim the decline in value of its fixtures and fittings, which investors in most established homes can no longer do.
Here's how depreciation works for residential rental property, using the Australian Taxation Office's (ATO) rules.
Two kinds of deduction
Capital works (the building)
Capital works deductions cover the cost of building the structure: walls, roof, concrete, built-in kitchens and bathrooms. For residential rental property where construction started after 15 September 1987, they're generally claimed at 2.5% of the construction cost each year for 40 years.
These deductions belong to the building, so a later owner can claim whatever's left of the 40 years. With a new build, you start at year one.
Depreciating assets (plant and equipment)
Depreciating assets are the items that wear out faster: things like hot water systems, air conditioners, ovens, cooktops, dishwashers, carpets, blinds and ceiling fans. Each one is claimed over its effective life, as set by the ATO.
The 2017 change that favours new builds
Since 1 July 2017, investors generally can't claim the decline in value of second-hand depreciating assets in a residential rental property. If you buy an established home, you usually can't claim the existing oven, carpet or air conditioner. Only new assets you buy yourself are deductible.
The ATO lists some exceptions: for example, where you're carrying on a business of letting rental properties, or where a newly built property is supplied within 6 months of being built and no one has lived in it or claimed deductions for it.
Buying new means the fixtures and fittings are new to you too, so both kinds of deduction are usually available from the first year. That's a key reason investors look at new builds, alongside lower early maintenance.
Getting a depreciation schedule
To claim capital works deductions you need a reasonable estimate of the construction cost. If you don't have the builder's figures, the ATO accepts an estimate from a qualified person, such as a quantity surveyor. Most investors get a tax depreciation schedule that lists both kinds of deduction for each year, and the fee for preparing it is generally tax deductible.
Give the schedule to your accountant when you lodge your tax return.
A worked illustration
As an illustration only: if the construction cost of a rental home is $400,000, the capital works deduction at 2.5% is $10,000 a year. Your actual figure depends on the construction cost in your schedule, when the property becomes available for rent, and how much of the year it's rented. Fixtures and fittings are on top of that.
A deduction lowers your taxable income. It isn't a refund of the same amount, and how much it's worth to you depends on your marginal tax rate.
What depreciation doesn't change
Depreciation helps cash flow, but it shouldn't be the main reason to buy. Location, rental demand, the price you pay and your loan matter more over the long run. Capital works deductions also reduce the cost base used for capital gains tax when you sell, so talk to your accountant about the full picture.
New homes for investors
Most of our listings welcome investors, including dual-key homes that earn two rents. Browse them by area, or call us to talk through what's available.
Common questions
Can I claim depreciation on a new investment property?
Generally yes. Residential rental buildings built after 15 September 1987 can claim capital works deductions, usually at 2.5% a year for 40 years. New fixtures and fittings can be claimed as depreciating assets.
Why can't I claim depreciation on fittings in an established home?
Since 1 July 2017, investors generally can't claim the decline in value of second-hand depreciating assets in a residential rental property, such as an existing oven or carpet, with some exceptions.
Do I need a depreciation schedule?
You need a reasonable estimate of the construction cost to claim capital works deductions. Many investors get a tax depreciation schedule from a qualified quantity surveyor, and its fee is usually tax deductible.
This article is general information only, current at 30/10/2026. It isn't financial, tax or legal advice. Rules and amounts change, so check the official sources below and speak to a licensed professional about your situation.
