How Do The Negative Gearing Changes Affect Depreciation? 

Recently legislated changes to the tax treatment of some negatively geared residential investment properties have led many investors to question whether the depreciation rules have also changed. 

The short answer is no. 

If you’re eligible to claim depreciation, you can still do so. Depreciation remains a legitimate tax deduction and continues to reduce the taxable income generated by your investment property. 

So, what’s changed? 

The negative gearing reforms have now been legislated, but the new rules will not begin until 1 July 2027.  

They do not change the depreciation rules themselves. Instead, they change how rental losses from certain residential properties can be used.

For established residential investment properties acquired after 7.30pm AEST on 12 May 2026, rental losses arising from 1 July 2027 will generally no longer be available to offset non-residential income, such as salary and wages.

Instead, affected losses may be used against income and capital gains from residential property, or carried forward for use in a future year. 

Properties held before the announcement are generally exempt from the changes, while eligible new residential builds can continue to be negatively geared. 

Where does depreciation come into this?

Because depreciation forms part of the deductions used to calculate your property’s overall profit or loss, it’s more important than ever that those deductions are accurate and well supported.  

A professionally prepared depreciation schedule and good record-keeping can help ensure you’re claiming what you’re entitled to while remaining compliant. 

For professional insight into the changes to negative gearing, watch our 2026 Federal Budget Seminar, hosted by Managing Director Shane McKenna.  

Common Depreciating Mistakes 

Understanding what you can claim, and ensuring those claims are properly supported, can help you avoid costly mistakes and make the most of the deductions available to you. 

Here are four common depreciation mistakes investors continue to make. 

1. Assuming You Don’t Need a Depreciation Schedule 

Many investors assume they can estimate depreciation themselves. 

In reality, a professionally prepared depreciation schedule helps identify eligible deductions and provides supporting documentation for your claims. Depending on the property, it may uncover deductions that could otherwise be missed. 

If your investment property has never had a depreciation schedule prepared, it may be worth reviewing whether you’re claiming everything you’re entitled to. 

2. Thinking Only New Properties Qualify 

A common misconception is that depreciation only applies to newly built properties. 

While new properties often offer more depreciation opportunities, established properties may still qualify for deductions relating to capital works, renovations and eligible improvements. 

The age of the property alone doesn’t determine whether depreciation is available. 

3. Confusing Capital Works and Plant & Equipment 

Not all depreciation is treated the same. 

Capital Works (Division 43) 

Capital works generally relate to the structural elements of the property, including: 

• Walls 
• Roofs 
• Foundations 
• Driveways 
• Structural improvements 

These deductions are generally claimed over a number of years. 

Plant & Equipment (Division 40) 

Plant and equipment generally refers to separatae, depreciating assets used in a property or business. Many are removable, but removability alone does not determine their classification. Depending on the circumstances, this may include:

• Air conditioners 
• Carpets 
• Blinds 
• Ovens 
• Dishwashers 
• Hot water systems 

For practice owners, ‘plant and equipment’ can include:

• Treatment chairs
• X-ray machines
• Sterilisers
• Computers, monitors, and printers
• Phone systems
• Waiting room furtniture

The cost of these is generally claimed based on the asset’s effective life or depreciation rate.

Note: The tax treatment of an item depends on factors such as whether it is a fixture, its effective life, how it is used, and whether it is used in a business or residential property.

Understanding the difference helps ensure deductions are claimed correctly. 

4. Renovations Can Change Your Depreciation Claims 

Renovations can affect your depreciation claim, but many property owners either miss deductions they’re entitled to or claim renovation costs incorrectly. 

Structural improvements, such as a new kitchen, bathroom or extension, may be eligible for capital works deductions, which are generally claimed over several years.  

Likewise, new assets such as ovens, dishwashers or air conditioners usually need to be depreciated over their effective life, rather than claimed as an immediate deduction. 

If you’ve renovated your investment property, it’s worth reviewing your depreciation schedule to ensure you’re claiming the right deductions in the right way. 

Make the Most of Your Investment Property

A depreciation schedule is just one part of an effective property tax strategy. Maximising the value of an investment property comes from making informed decisions across tax, legal and wealth planning. 

At Aintree Group, we help property investors understand the broader tax implications of owning and investing in property, including depreciation, investment property tax planning, ownership structures, superannuation strategies, and tax planning for individuals, family groups and investment entities.

Whether you’re purchasing your first investment property, expanding your portfolio or reviewing your current structure, our integrated Accounting, Legal and Wealth teams can help ensure every decision supports your long-term goals.

Speak to our team today to discuss your property investment strategy.

This is general advice only and has not been prepared with your individual situation or needs in mind. For personalised advice, we highly recommend that you seek professional guidance from a qualified adviser.