The ATO outlines two categories that make up depreciation deductions –
plant and equipment (division 40) and capital works (division 43).
What is plant and equipment?
Plant and equipment (division 40) assets are items which are easily removable or mechanical in nature from a residential investment property or commercial building. Property owners can claim depreciation for the wear and tear of these assets.
The asset’s condition, quality and effective life all determine the allowances available.
What is deductible under plant and equipment?
Plant and equipment deductions cover items such as:
- Air-conditioning units
- Blinds and curtains
- Hot water systems, heaters, solar panels
- Security systems
- Light fittings
- Swimming pool filtration and cleaning systems
- Carpet and flooring
- Manufacturing equipment
- Commercial ovens
Plant and equipment deductions
Plant and equipment assets are identified through tax legislation as assets that can reasonably be expected to decline in value or depreciate over the time they’re used.
Plant and equipment depreciation rates are calculated based on an asset’s effective life which is set by the tax commissioner and updated regularly through tax rulings.
The depreciation rates and effective lives of all ATO specified plant and equipment (division 40) assets differ by asset and even by industry. The ATO recognises that plant and equipment items will wear out more quickly than the building itself and likely need replacing sooner.
Find out the effective life and depreciation rate for any residential or commercial plant and equipment asset with BMT Rate Finder.
2017 changes to residential depreciation rules
Depreciation legislation was amended in 2017. The change meant that depreciation could not be claimed for second-hand plant and equipment assets.
Residential owners can still claim for any new plant and equipment assets added to the property such as an oven or dishwasher, as well as the full capital works deductions which make up 85 – 90% of the total claim. Read more about the current depreciation legislation.
A BMT Tax Depreciation Schedule will ensure you’re maximising the depreciation deductions for both plant and equipment and capital works for your property. The schedule covers all deductions available over the lifetime of a property and is 100 per cent tax deductible.
BMT will always assess each property and make sure there is a substantial claim. If we can’t find double our fee worth of deductions in the first full financial year claim, there will be no charge for our services.
Plant and equipment (division 40) FAQs
All plant and equipment items have individual effective lives specified by the ATO.
Our tax depreciation schedules show each item’s:
- Estimated cost
- Effective life
- Depreciable value
- Contribution to the depreciation total per financial year
Individual costs for the original building structure, including capital improvements, are all depreciated at the same rate.