How to Calculate Depreciation on Off the Plan Investments

When you buy an off the plan property, one of the biggest financial advantages you can access is property depreciation. It’s a powerful tax benefit that allows investors to claim deductions on the natural wear and tear of their property and its assets over time. Understanding how depreciation works can help you reduce your taxable income and boost your return on investment.

What Is Property Depreciation?

Property depreciation is a tax deduction that investors can claim on the decline in value of their investment property’s structure and assets.In simple terms, it recognises that parts of your property — like carpets, appliances, and fittings — lose value over time due to age and use.

There are two main categories of depreciation:

1. Capital Works Deductions (Division 43) – relates to the building’s structure, such as walls, roof, and concrete.
2. Plant and Equipment Deductions (Division 40) – covers removable assets like air conditioners, blinds, and kitchen appliances.

Both categories can add up to significant annual tax savings.

The Charlotte | Buy with Coposit | Secure with $10k and $307 x 40 weeks

Why Off the Plan Properties Offer the Best Depreciation Benefits

Newly built and off the plan properties often deliver the highest depreciation returns because all elements of the building and its fittings are brand new. This means investors can claim the maximum allowable deductions from day one.

Key advantages include:

• 100% of the building’s structure qualifies for capital works deductions
• All fixtures and fittings are new and eligible for plant and equipment claims
• Lower maintenance costs due to new construction
• Higher initial deductions that improve cash flow

If you’re buying an off the plan apartment or townhouse, you’re likely to benefit from the full 40-year lifespan of depreciation claims under Australian tax law.

Solara | Buy with Coposit | Secure with $10k and $646 x 91 weeks

How Depreciation Is Calculated

Depreciation isn’t a one-size-fits-all figure. It depends on factors like construction cost, property type, and the value of individual assets.A professional quantity surveyor is usually required to prepare a Tax Depreciation Schedule, which outlines exactly what you can claim each year.

Common calculation methods:

1. Prime Cost Method – calculates depreciation as a fixed percentage of the asset’s initial cost each year.
2. Diminishing Value Method – allows for higher deductions in the early years as the asset’s value declines faster.

Most investors choose the diminishing value method because it maximises early tax benefits.

Harbour Shores | The Residences | Off the plan QLD | Secure with $10k and $15,790 x 19 weeks

Example of Off the Plan Depreciation

Let’s say you purchase a new apartment for $700,000 off the plan.A qualified quantity surveyor estimates:

• Building structure (capital works): $300,000
• Fixtures and fittings (plant and equipment): $50,000

Your first-year depreciation claim might look like this:

• Capital works: 2.5% of $300,000 = $7,500
• Plant and equipment: 20% of $50,000 = $10,000

That’s a total of $17,500 in tax deductions in just the first year, reducing your taxable income and improving your investment cash flow.

Why You Need a Tax Depreciation Schedule

A depreciation schedule is an essential document for any property investor. It ensures you’re claiming the right amounts and complying with Australian Tax Office (ATO) guidelines.

Senso | Buy with Coposit | Secure with $15k and $571 x 106 weeks

A good schedule will include:

• A breakdown of every claimable item
• Annual depreciation rates
• Construction costs and effective life of assets
• Projections for future tax years

This report typically lasts for the property’s full 40-year claim period, so it’s a one-time cost that delivers long-term value.

Coposit: Making Off the Plan Investment Easier

With Coposit, you can secure your off the plan investment with just $10k and pay the rest in weekly instalments. There’s no need for a large upfront deposit, allowing you to start your investment journey while your property is being built.

Combining Coposit’s flexible payment system with depreciation benefits helps investors maximise returns and minimise stress during construction.

Harlyn | Off the plan Perth | Buy with Coposit | Buy with $10K and $562 x 97 weeks

Maximising Your Long-Term Returns

Depreciation is one of the most effective ways to increase the profitability of your investment property. When paired with the advantages of buying off the plan — such as new builds, warranty coverage, and strong growth potential — it creates a powerful long-term wealth strategy.

By understanding and calculating depreciation correctly, you can make smarter financial decisions, reduce your tax burden, and enjoy better cash flow from your investment.Start exploring off the plan opportunities with Coposit and take full advantage of the financial benefits available to Australian property investors.