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Depreciation Schedules When Selling an Investment Property in Brisbane 2026

If you have been claiming tax depreciation on a Brisbane investment property, selling triggers adjustments that can catch investors off guard. Here is what you need to understand before you list.

Property depreciation is one of the more significant tax benefits available to residential investors in Australia. For a well-appointed Brisbane investment property, annual depreciation claims of several thousand dollars are not unusual, and over a holding period of five to ten years the cumulative value of those deductions is substantial. When it comes time to sell, understanding how depreciation interacts with your sale is something that is worth working through with your accountant well before you list, not after you have accepted an offer.

The key thing to understand is that there are two distinct categories of depreciation, and they are treated very differently when you sell.

Division 40 and Division 43: two different things

Division 40 of the tax legislation covers plant and equipment items: the removable assets within a property that have a limited effective life. For a residential investment property, this typically includes hot water systems, air conditioning units, dishwashers, carpets, blinds, ceiling fans, and similar fittings. These items are depreciated over their individual effective lives, which are set out in the ATO's tax ruling on effective life. Your depreciation schedule lists these items individually with their original values and the depreciation claimed to date.

Division 43 covers the building itself: the structural components and fixed improvements. This is commonly called the capital works deduction. The building allowance is available at a rate of 2.5% per year on the original construction cost for residential properties built after 15 September 1987. Renovations and improvements completed after that date also carry a capital works deduction from the date they were completed.

These two categories are treated very differently when you sell, which is the part that often surprises investors.

What happens to plant and equipment on sale

When you sell an investment property, the ATO requires a balancing adjustment for each plant and equipment item you have been depreciating. In simple terms: each item had an opening value when you started depreciating it, and you have been reducing that value over time through your annual deductions. When you sell, the remaining tax value of each item is compared to the portion of the sale price that can reasonably be attributed to that item.

If the attributed sale value exceeds the remaining tax value, the difference is assessable income in the year of sale. It is not a capital gain and is not eligible for the 50% CGT discount. It is treated as ordinary income. For a property with substantial plant and equipment that has been significantly depreciated, this balancing adjustment can run to several thousand dollars of additional assessable income on top of any capital gain.

Conversely, if an item's remaining tax value exceeds the attributed sale value, you have a terminal loss, which is generally deductible. The practical calculation for each item requires allocating a portion of the total sale price to it, which involves some judgement and is an area where a quantity surveyor or your accountant can assist.

Capital works on sale: no balancing adjustment, but the buyer benefits

Unlike plant and equipment, the capital works deduction (Division 43) does not trigger a balancing adjustment when you sell. The building structure is not an asset you are depreciating in the same way, and there is no recapture mechanism on sale for the capital works deductions you have claimed.

What does happen is that the buyer acquires the right to claim the remaining capital works deductions going forward. The capital works allowance passes to successive owners based on the original construction cost, not the purchase price. This is one of the reasons a depreciation schedule from a qualified quantity surveyor has genuine value for the buyer: it documents the construction cost and the deductions available from the date of their purchase onwards.

For a Brisbane investment property built post-1987 in reasonable condition, the capital works deductions available to the buyer can amount to meaningful annual deductions for many years. A buyer who is a sophisticated investor will ask for your depreciation schedule, and including it in your marketing data room positions you as a well-organised vendor.

Should you update your depreciation schedule before selling?

If your schedule is current and from a reputable quantity surveyor, it is ready to hand over. If it has not been updated in several years, or if you have made improvements or replacements to plant and equipment items since the last update, it may be worth having it reviewed. An updated schedule costs in the range of $400 to $700 from most quantity surveying firms and is tax deductible.

The benefit to you is twofold. First, it gives you an accurate picture of the balancing adjustment you are likely to face on sale, which informs your net proceeds calculation. Second, it is a complete document to give to the buyer, which removes a potential negotiating point and demonstrates that you are dealing transparently.

Getting your tax position right before you list

The interaction between depreciation recapture, the capital gains tax calculation, and any other tax considerations specific to your situation is something your accountant should model before you commit to a sale price and timeline. The variables that matter include your marginal tax rate, the length of your ownership, whether you held the property in your own name, a trust, or a company, how the 50% CGT discount applies to the capital gain, and the timing of the sale in relation to your overall income position for the financial year.

Investors sometimes make decisions about sale timing or price based on the gross sale figure without accounting for the full tax position. In Brisbane's inner-east market, where holding period gains on residential investment properties have been substantial over the past decade, the gap between gross sale proceeds and net after-tax proceeds can be significant. A clear picture of your tax position before you sign an agency agreement is not optional.