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Why Depreciation is the Most Overlooked Tool in Property Investing
Many property investors focus on growth, strategy, and acquisition but forget one of the most impactful tools for holding and compounding wealth: depreciation
In this episode of The Property Nerds podcast, InvestorKit’s Founder Arjun Paliwal sits down with Tuan Dong from Duo Tax Quantity Surveyors to unpack what depreciation is, how it works, and why smart investors are using it to improve cash flow, offset tax, and protect their portfolios in today’s interest rate environment
What Is Depreciation and Why Does It Matter?
Depreciation is the wear and tear on a building and its fixtures over time and in property investment, it becomes a non-cash tax deduction that increases your cash flow without needing to spend extra
Tuan explains:
“It’s essentially free cash flow. You don’t physically pay for it, but you can claim it — boosting your holding power”
This deduction includes both: Capital works (Division 43): walls, floors, roof, slab Plant & equipment (Division 40): ovens, carpets, blinds, air conditioners
Residential vs Commercial Property Depreciation
One of the biggest tax planning differences is between residential and commercial properties.
Since May 2017, secondhand residential properties can no longer claim plant & equipment depreciation. But in commercial settings, even secondhand plant & equipment can still be depreciated.
This means commercial properties can yield significantly larger tax deductions, especially in positively geared scenarios where depreciation helps reduce your tax bill.
Renovations, Scrap Value and Missed Opportunities
Tuan breaks down how many investors miss thousands in cash flow by failing to
“Scrapping $15,000 worth of old fixtures before a renovation could give you immediate deductions just from timing it right”
The Process From Property to 40-Year Schedule
Tuan breaks down how many investors miss thousands in cash flow by failing to
- Send your property details (address, settlement date)
- Duo Tax assesses it via RP Data and renovation history
- If worthwhile, an inspection is arranged
- You receive a 40-year depreciation schedule, used in your tax returns every year
“For $600, you could unlock $10,000+ in deductions over a few years even more on the full schedule”
Depreciation and Capital Gains What to Know Before Selling
Claiming depreciation now can affect your capital gains tax calculation later. When you sell, the ATO adjusts for any depreciation claimed so it’s not “free money” but rather a front-loaded tax benefit
However, with the CGT discount typically 50 percent for personal owners most investors still come out ahead
Checklist Should You Get a Depreciation Report?
Final Thought
Depreciation isn’t a strategy. It’s the fuel that powers your ability to keep going. Holding power is everything in property, and this tool can help you hold longer, grow faster, and invest smarter
Watch the Full Episode
Want to dive deeper into how depreciation can unlock cash flow and investment performance?
▶️Watch the full conversation with Tuan Dong from Duo Tax on YouTube: https://www.youtube.com/watch?v=tWdrZaUGoqE&t
