What is Division 40?
When it comes to claiming depreciation on your residential or commercial investment property, understanding what qualifies under Division 40 of the Income Tax Assessment Act 1997 can help you unlock significant tax deductions. While both Division 40 and Division 43 allow investors to claim depreciation, they apply to different types of property components. This article focuses on Division 40—covering what it is, which assets are included, and how a depreciation schedule can maximise your tax return.
How does Division 40 Differ from Division 43?
Division 43 covers the capital works or structural elements of a property—such as walls, floors, roofs, and fixed cabinetry. These elements are typically claimed at a fixed rate over 40 years from the time construction was completed.
In contrast, Division 40 assets are movable or mechanical and are depreciated at rates based on their effective life (as determined by the ATO). They also tend to depreciate faster, making them valuable deductions in the early years of ownership.
✅ Tip: A comprehensive depreciation schedule from a qualified quantity surveyor ensures that both Division 40 and Division 43 deductions are identified and maximised.
What assets are categorised as Division 40?
Division 40 refers to the depreciation of plant and equipment assets—these are the removable or mechanical fixtures within an investment property. These items have a limited effective life and decrease in value over time through wear and tear or obsolescence. As a property investor, you’re entitled to claim this decline in value each financial year as a tax deduction.
Division 40 Asset Examples – Residential
Plant and equipment assets commonly claimed under Division 40 include:
- Air-conditioning units
- Hot water systems
- Ceiling fans and exhaust fans
- Blinds and curtains
- Ovens, cooktops, and rangehoods
- Carpet and floating floorboards
- Smoke alarms
- Security systems
The ATO publishes a list of effective lives for these assets, which qualified quantity surveyors use to calculate your annual depreciation deductions.
Division 40 Asset Examples – Commercial
Examples of Division 40 assets in a commercial property can be very broad. Similarly to
residential they include those assets listed above, but can also include industry specific plant and equipment assets. This list is extensive and can range from office furnishings to industrial equipment, hospitality assets and so much more.
Who can claim depreciation of assets under Division 40?
Individuals or entities that own or ‘hold’ plant and equipment items covered by Division 40 are entitled to claim tax deductions for the depreciation of those assets annually. For more information about who can claim for depreciation of plant and equipment under Division 40 in commercial properties (ie building owner or leaseholder) check out our commercial specific information here.
How do I claim for depreciation of assets (plant and equipment) under Division 40?
The best way to accurately claim for depreciation of assets under Division 40 is to have a quantity surveyor prepare a capital allowance and tax depreciation schedule for you. Your tax depreciation schedule will include all the deductions you can claim for building and capital allowance (depreciation) under both Division 40 and Division 43 (Building/Capital Works).
Learn more about commercial or residential tax depreciation schedules here. If you are claiming for a single asset, or wanting to prepare a depreciation schedule yourself, the ATO outlines the rulings and in the Income Tax Assessment Act (ITAA) 1997. Rates for plant and equipment items are summarised here.
How much can I claim for Division 40 assets?
The tax deductions claimable for depreciation of Division 40 assets are individualised by asset – meaning every asset is considered separately. Assets have different effective lives and therefore depreciate at different rates.
Other factors can also impact how much you claim for Division 40 in a year, such as the method of depreciation (diminishing value or prime cost) as well as the pooling of low-cost and low-value assets. Assets disposed of may be written off in a lump sum. The best way to ensure you maximising the deductions available to you every year we recommend using a tax depreciation schedule prepared by a quantity surveyor such as Capital Claims Tax Depreciation.
Can I claim depreciation for assets under Division 40 in a second-hand property?
Assets you have purchased brand new and installed to a second-hand investment property are eligible for depreciation deductions under Division 40. Assets purchased second-hand as part of the property, or installed to the property, are not eligible for annual deductions whilst you own the property, but depreciation of these assets may be claimable as an expense when the property is sold.
Related articles and pages:
What is Division 43 or Capital Works?
Capital Claims Tax Depreciation
Commercial Depreciation
Tax Depreciation Schedules
Get a Free Quote for a Depreciation Schedule.
We’ll include an estimate of your potential deductions, and if we can’t guarantee a strong result, we’ll let you know up front and there will be no cost to you.