Investor Tax Wins: How Depreciation Schedules Supercharge New Apartments

New apartments often give investors access to powerful tax deductions on both the building itself and the fixtures inside it. When a specialist prepares a depreciation schedule, those deductions can improve after-tax cash flow and help offset holding costs in the early years. In this guide, we walk through the basics, share a simple worked example and finish with a practical checklist you can print and keep with your records.

Who This Is For

This guide is designed for investors weighing up new versus established apartments and wanting to understand the tax impact in real terms. It also suits buyers who are about to settle on an off-the-plan apartment and want to get year one cash flow set up from day one.

Depreciation 101 

When you buy a new apartment, you are usually buying two broad things for tax purposes. 

• Division 43 -  covers the structure, like concrete, brickwork and walls, which is generally claimed over a long period. 
• Division 40 -  covers plant and equipment, like appliances, carpets, air conditioning units and your share of lifts or similar services.

New apartments often shine because more of the fixtures are eligible as plant and equipment and the building usually has its full remaining life ahead of it. Your accountant uses these deductions to reduce your taxable rental income, which in turn can reduce the tax you pay on that income.

Why New Builds Win (Consistently)

Modern specifications in new projects usually mean more claimable items. Think energy-efficient air conditioning, quality kitchen appliances and upgraded common facilities such as gyms or shared rooms. Each eligible item can contribute to your Division 40 deductions.

Because construction costs are known and carefully documented. When you own from day one, you also capture the full remaining life of the building. If you delay getting a schedule, you cannot usually go back and claim for years where you did not include depreciation, although you may be able to amend recent returns.

How a Depreciation Schedule Works 

After settlement, you gather your contract of sale, plans, finishes schedule and inclusions list. These, along with construction cost data, to estimate the value of both the building structure and the plant and equipment, including your share of common areas.

They then issue a depreciation schedule that can run for up to forty years and sets out year-by-year deductions under both Division 43 and Division 40. You or your accountant plugs the figures into your tax return each year. As a simple tip, many investors like to order the schedule before 30 June in their first income year so they capture as much of year one as possible.

A Quick Depreciation Snapshot

The figures below are simple round numbers for illustration only, not actual ATO rates or advice.

• Purchase price: assume your financial advisor allocates a portion of this to the building structure and fixtures.
• Year 1 Division 43 deduction (A): $8,000 (illustrative only).
• Year 1 Division 40 deduction (B): $12,000 (illustrative only).
• Total Year 1 depreciation (C): $20,000 (A + B, illustrative only).

If your marginal tax rate is M% and for this example, we assume M is 37%, the approximate cash benefit in year one is:

• Cash benefit ≈ C × M% = $20,000 × 37% = $7,400 (illustrative only).
  
  

Over the first five years, you might see higher deductions in the early years then a gradual taper as some plant items run through their effective lives. If you drew a simple bar chart with years one to five along the bottom and the annual deductions as the bar heights, you would see the first bar as the tallest, with each later bar stepping down slightly over time.

Off the Plan (OTP) Considerations

When you buy off the plan, the inclusions list matters. Appliance model numbers, flooring type and bathroom finishes can all influence the value of plant and equipment. In many new apartment projects, you will also own a share of common property such as gyms, lifts, corridors and landscaped areas. These can add to both Division 43 and Division 40 claims. Your depreciation schedule will usually start from the date of settlement, with the first year prorated if you settle midway through a financial year.

Maximising Your Claims

Keep good records, including your contract of sale, any progress claims for construction, variation orders and the final settlement statement. If you furnish the apartment for lease, keep itemised invoices for furniture and whitegoods. Some movable items may be eligible as plant. For joint owners, schedules can usually be split to reflect different ownership percentages. Repairs that simply bring something back to its original condition are treated differently to improvements that upgrade it and improvements are typically depreciable.

Cash Flow Reality Check

A depreciation schedule works best when you see it as one part of your overall cash flow picture, not the whole story. Set up a simple twelve-month forecast that includes rent, owners' corporation levies, council and water rates, interest, insurance and a maintenance buffer.

Depreciation can soften early negative cash flow while your rent builds over time. It is important to remember that these deductions affect tax, not bank valuations or loan approvals, so they sit alongside rather than replace other investment fundamentals.

Common Myths

Myth 1: “Depreciation only applies to old buildings.”
In practice, new builds often allow higher and more diverse claims because fixtures are new and usually well documented.

Myth 2: “I can estimate it myself.”
The ATO generally expects a qualified quantity surveyor or accountant to substantiate construction costs, especially where you did not build the property yourself.

Myth 3: “If I forget this year, I can claim extra next year.”
You may be able to amend recent tax returns if you missed deductions, however, missed years do not tend to compound in your favour, so it is usually better to start early.

SMSF & Special Cases

Self-managed super funds that hold eligible investment property can often claim depreciation within the SMSF, subject to superannuation and tax rules. It is important to get tailored advice as the structure and tax rates differ from personal ownership.

For short stay or fully furnished leases, the asset mix can change your Division 40 profile because you may have more movable items. Keeping clear invoices helps your quantity surveyor and accountant classify everything correctly.

Buyer Playbook (Before & After Settlement)

Pre settlement
Confirm the inclusions in your off-the-plan contract and think carefully before agreeing to downgrades that reduce the quality or value of plant and equipment.

Post settlement
Engage a reputable quantity surveyor or accountant, provide your documentation and confirm both the settlement date and the first lease date. Set a calendar reminder each June to share the latest schedule figures with your accountant so nothing is overlooked.

The Depreciation Checklist 

 ✅Contract of sale and settlement statement.

 ✅Floor plans, finishes schedule and appliance model numbers.

 ✅Owners' corporation disclosure, including details of common facilities.

 ✅Invoices for any furniture or additional fit-out.

 ✅Ownership percentages, tenant start date and details of any private use.

 ✅A depreciation schedule was received and forwarded to your accountant.

FAQs 

Do I still get Division 40 on second-hand assets?
Rules differ and can change. New builds typically maximise Division 40 because fixtures are new and clearly documented. Always seek up-to-date advice.

Can I claim during a vacancy?
Depreciation is usually only claimable when the property is genuinely available for rent, such as when it is listed with an agent.

What if I renovate later?
New assets introduced in a renovation generally start their own depreciation pattern. Let your financial advisor know about any significant upgrades.

Does furnishing always help?
Not always. Extra items only help if they are eligible, suit your target tenant and make sense when you weigh up cost, wear and tear and expected rent.

Norus Projects continues to focus on well-planned new apartment projects in connected Melbourne locations, which can pair lifestyle benefits with smart tax planning when supported by professional advice. If you are exploring a new apartment purchase and want to understand how depreciation might fit into your strategy, speak with your adviser and connect with the Norus Projects team to learn more about current opportunities.

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