Article· Buying· Cash Flow
What Is Property Depreciation and How Does It Work?
25 Apr 2026 · 2 min read
Depreciation allows property investors to claim tax deductions on the declining value of their assets.
**What is depreciation?**
Depreciation is the reduction in value of an item or property over its suggested useful lifetime. It is common for property investors to use depreciation to maximise tax deductions and offset their income. At tax time, depreciation details are provided to an accountant to apply to the tax return. This is generally done through a depreciation schedule, although receipts for completed works—such as a new kitchen or flooring—may also be used. Most items are claimed over several years, while certain smaller items may be claimed in full in the first year.
**What is a depreciation schedule?**
A depreciation schedule is a document that sets out the value of a property and the fixtures and fittings within it. It identifies all the items that may be claimed against tax. Because a building has a set depreciable lifespan, new properties generally offer higher depreciable value than older buildings that have already used much of their allocated limit. Investors often look for properties with strong depreciation benefits to help lower their taxable income.
**How do I create a depreciation schedule?**
A depreciation specialist is typically engaged to prepare a depreciation report, though some builders or developers provide one as an incentive. Developers can be asked if a free depreciation schedule is included.
Preparing a schedule for a new property is straightforward because item values are easy to calculate. Older properties can be more complex and usually require professional assistance. Quantity surveyors prepare these reports to accurately reflect property assets, and their fees are generally tax-deductible.
**When should I get a depreciation schedule?**
A depreciation schedule should be prepared as early as possible, ideally before tenants move in. This ensures maximum tax benefits and avoids disturbing occupants. In some cases, a report can be backdated if it was not obtained initially.
**Why do I need a depreciation schedule?**
Depreciation is one of the most frequently overlooked tax deductions for property investments. Without a depreciation schedule, property owners risk missing out on significant tax savings.
