What is Property Plant and Equipment?

Understanding the assets you’ve purchased is essential when it comes to investment. After buying an investment property, you can claim deductions on the ‘wear and tear’ it experiences. Typically, property investors divide these deductions into capital works deductions or plant and equipment depreciation.

The ATO defines plant and equipment assets as those items that are easily removable or mechanical. Examples include stoves, air conditioners, carpet or light fittings.

After the 2017 Federal Budget, it’s crucial to note that many investors can only claim depreciation on newly purchased plant assets. Some exceptions are if the property is commercial or industrial, if the property was purchased by a company (excl. SMSF), or if you owned and rented the property before May 9, 2017.

What items can you claim property plant and equipment depreciation on?

Below are some of the common plant and equipment assets within residential properties. The rates at which these assets depreciate vary according to their useful lives.

Air-Conditioning (Duct excluded) Lifts Rain Water Tanks
Beds Freestanding furniture Security Systems
Carpet Garden Sheds Shower Curtains
CCTV equipment Gym equipment Smoke detectors
Clothes dryers Hose reels Swimming pool cleaning equipment
Cooktops Hot water systems (excluding piping) Swimming pool filtration equipment
Dishwasher Microwave ovens Television sets
DVD players Ovens Washing machines
Exhaust fans Pumps Window blinds
Linoleum Range Hoods Window curtains

Property Plant and Equipment (PP&E) Depreciation Rate

You must note that different items depreciate at different rates when claiming your deductions. The depreciation rate for property plant is bed on the asset’s effective life (EL) while equipment is based on the asset’s effective life (EL).

The effective life refers to how many years the ATO estimates that a particular depreciating asset can be used to produce income. Hard-wearing assets, such as steel rainwater tanks have a longer effective life than fixtures that tend to be replaced more regularly, such as carpet.

The depreciation claim is calculated, for an asset, by dividing its value by its effective life.

For example, the ATO states that a brand-new Air Conditioner has a useful life of 10 years. Using the Prime Cost method of depreciation, if the purchase price of the Air Conditioner is $2000, you can claim $200 per annum.

How much can I claim on my investment property?

If measured reliably, you can work out your total depreciation claims on your investment property. Our depreciation calculator can provide you with an accurate estimate on your potential tax savings.

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Years Diminishing Value Prime Cost
Year 1 $0.00 $0.00
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Prime Cost Method

As demonstrated above, the prime cost method of depreciation calculates a plant and equipment asset’s annual decline in value across its lifespan. This method is helpful if you want your accumulated depreciation deductions to be more evenly spread during your ownership of an investment property.

Diminishing Value Method

The diminishing value depreciation method accelerates the property plant and equipment depreciation rate. Essentially, it allows the investor to claim more depreciation during the early years of an asset’s life. This method assumes that an item of property plant experiences higher depreciation levels during the first few years of use.

Using the previous Air Conditioner example, the diminishing value claim would be $400 in the first year. This is based on the formula:

Base Value x (Days Held / 365) x (200% / EL)


$2000 x (365/365) x (200% / 10)

In the second year, the Base Value would be reduced to $1600 ($2000 – $400). This means that the deduction in Year 2 will be smaller than Year 1: $1600 x (365/365) x ($200% / 10) = $320.

Assets Valued Under $300

Depreciation of Property Plant and Equipment

The ATO also allows investors to claim an immediate deduction in the first year of ownership if the cost of an item costs $300 or less. Common assets that fall into this category are ceiling fans, clotheslines, lamps, or remote controls. You cannot claim an immediate deduction if the asset is part of a more extensive set costing more than $300 in total.

Another interesting point is that the rules still apply if your interest in a more expensive asset falls under $300. For example, if you jointly own a property with your partner 50/50, you could each claim an immediate deduction for any assets costing less than $600. This is because your shares would be below $300.

Low-Value Pool

You can allocate low-cost and low-value assets to a low-value pool. These assets are claimed at 18.75% in the first year of ownership and 37.5% in every year after that.

Low-cost assets refer to all depreciating items that cost less than $1,000 at the end of the income year in which you began using it or had it installed ready for use for a taxable purpose.

A low-value asset is different. If, as of July 1 (for the current year), an asset had depreciated to less than $1,000 under the diminishing value method, it is considered a depreciating asset.

Once you have created a low-value pool and allocated low-cost assets to it, you must pool all other low-cost assets you have from that time onwards. It is important to note that this same rule does not apply to low-value assets.

Maximizing Your Depreciation

Claiming property plant and equipment depreciation can be pretty complicated. The purpose of understanding these deductions is so that an investor can ensure they are not paying more tax than they need to.

It is advisable to use a quantity surveyor to assist with depreciation claims. Quantity surveyors can give accurate assessments regarding the value of assets in the construction industry.

They can provide complete reports on claimable depreciation rates of plant and equipment. An accountant can then use this report to make your tax return claim.

At Washington Brown, we can produce reports for plant and equipment and the property itself. We have several ways in which we can get the most out of your depreciation:

Are there future economic benefits for me with a depreciation schedule?

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What happens if you no longer use the property plant and equipment?

If you have items you no longer use or have disposed of, a balancing adjustment event will occur. A balancing adjustment means you must work out an amount to include in your assessable income. If you do not do this, you will not be able to claim this in your deductions.

The balancing adjustment amount is worked out by comparing the asset’s termination value and its adjustable value at the time of the balancing adjustment event.