🎧 In this episode of Property Trio, Cate, Dave and Mike unpack one of the most commonly misunderstood aspects of property investing: tax depreciation. What’s often dismissed as a simple “set and forget” report is, in reality, a layered system governed by legislation, timing, and professional judgement.

The Trio break down the two key components; Division 43 (capital works), and Division 40 (plant and equipment). They explain why understanding the difference is critical. While Division 43 provides a steady, predictable deduction over time, Division 40 is where both opportunity and risk sit. Done well, it can significantly improve early cash flow. Done poorly, it can leave investors thousands of dollars behind.

A major turning point, (the May 2017 legislative change), is explored in detail, highlighting how the removal of depreciation on second-hand plant and equipment reshaped the landscape for investors buying established property.

Mike shares practical insights into why quantity surveyors play a crucial role, even when build costs are known, and why inspections are essential for accuracy. The conversation also touches on often-overlooked areas, like depreciation on common property in apartments and the impact of unit entitlements.

The episode takes an unexpected turn into the “weird stuff”…. from failed legal arguments about identity and jurisdiction, to investors listing properties at unrealistic rents to claim deductions. These real-world cases reinforce a consistent theme: the tax system focuses on substance over form.

Perhaps the most surprising takeaway is around cost base. Failing to claim depreciation doesn’t avoid tax, but can actually make the outcome worse.

This episode is a must-listen for investors who want to move beyond surface-level understanding and ensure they’re not only claiming what they’re entitled to, but doing it correctly.

….. and our gold nuggets:

Dave Johnston’s gold nugget: “Make sure you get a depreciation schedule, (or at least contact a reputable company to see if it’s worthwhile), and do it early so that you don’t lose the opportunity to claim. And make sure the firm does an actual inspection! And don’t forget that you’ll be paying capital gains tax on the Division 43 claims; something investors often don’t realise.”

Cate Bakos’s gold nugget: Firms who cut corners and don’t inspect are a risk. For the price range we’re talking about, it seems a poor scale of economy to skimp on this important task.

Related episodes:

Ep. 55 – All things property tax – how to understand your deductions at tax time

Ep. 87 – Optimising tax deductions– top mortgage and loan strategy tips

Ep. 108 – Understanding my land tax – Cash flow and diversification overview

Ep. 250: Investment Borrowing Masterclass – Maximise Tax Deductions and Advanced Mortgage Strategies for Long-Term Wealth Creation

Ep. 265 – Tax Time Tips for Property Investors – Avoiding ATO Scrutiny, Optimising Deductions, Repairs, and Depreciation

Upcoming episode: #358 – March 2026 market update