New data from the Australian Taxation Office (ATO) confirms that thousands of residential property investors are missing out on significant tax deductions by under-claiming on depreciation, the second-largest tax deduction after interest on loan repayments.
Figures released by the ATO in June 2025 reveal that the FY22-23 average depreciation claim for residential properties was $3,905, comprising $2,724 in capital works (Division 43) and $1,181 in plant and equipment (Division 40). In contrast, BMT Tax Depreciation reported a significantly higher average claim of $8,925 for the same financial year, with their latest FY24–25 data showing an average of $12,105, highlighting the substantial difference a tailored depreciation schedule can make.
Bradley Beer, CEO of BMT Tax Depreciation, says the key to maximising deductions lies in engaging a specialist who performs a comprehensive site inspection. He further states: “What separates a top-performing depreciation claim from an underwhelming one is this crucial step. ATO compliance isn’t just about entering numbers, it’s about identifying every possible deduction.”
“The data gap tells a clear story,” says Mr. Beer. “Investors who rely on desktop estimates or fail to engage a depreciation specialist are potentially leaving thousands of dollars on the table each year.”
Depreciation refers to the natural wear and tear of an investment property and its assets over time. It’s the only non-cash deduction available to property owners and falls under two categories:
- Division 43 capital works, for structural components such as walls, flooring and cabinetry
- Division 40 plant and equipment, for mechanical or removable assets like carpets and appliances
While legislative changes in 2017 limit Division 40 deductions for second-hand residential properties, Division 43 remains fully claimable. BMT’s data shows 85–90 per cent of most depreciation claims arise from capital works, claimable at 2.5 per cent annually over 40 years, even on older properties.
BMT’s methodology includes detailed physical inspections, ensuring all improvements, especially historical upgrades and renovations completed by previous owners, are identified and claimed. This process complies with tax legislation and is supported by the Australian Institute of Quantity Surveyors and the National Tax and Accountants’ Association.
“BMT data shows that 66 per cent of second-hand properties have had additional works completed, often by previous owners or many years ago,” says Mr. Beer. “Without a site inspection, these works are likely to be overlooked.”
The ATO recognises quantity surveyors as among the few professionals qualified to estimate construction costs for depreciation purposes. Specialists like BMT apply their combined tax and construction expertise to identify every legitimate deduction, while maintaining full ATO compliance.
“Crucially, the cost of preparing a depreciation schedule is itself tax-deductible, and because depreciation is a non-cash deduction, it delivers a direct boost to cash flow without any upfront expense,” says Mr. Beer.
A professionally prepared schedule backed by a physical inspection is not just best practice, it’s a proven way to maximise returns, ensure compliance and protect against costly oversights.
