For many Australian small business owners and property investors, the journey toward building long-term wealth is paved with hard work, persistence, and strategic planning. In our community, we truly believe the small business owner is the hero. However, even the most dedicated heroes can miss out on powerful tools that significantly boost cash flow—and one of the most effective, yet frequently misunderstood, is tax depreciation.

In this episode of The Lat Chat, we sat down with Tuan Duong, the principal and founder of Duo Tax. Tuan’s story is a classic example of the Australian dream: starting as a one-man show in his parents’ garage, he leveraged his background in civil engineering and quantity surveying to build a powerhouse business that helps tens of thousands of Australians save money on their taxes.

What Exactly is Property Depreciation?

At its core, depreciation is simply the recognition that assets wear out over time. Just as a vehicle loses value the moment it leaves the showroom, the components of your investment property—from the bricks and mortar to the dishwasher in the kitchen—decline in value as they age.

Under Australian tax law, specifically the Income Tax Assessment Act, the ATO allows property owners to claim this “wear and tear” as a tax deduction. Because you aren’t physically spending money each year to incur this loss, it is often referred to as a “non-cash deduction,” making it an incredibly efficient way to lower your taxable income and increase your actual take-home cash flow.

The Two Pillars of Your Claim

Tuan explains that for tax purposes, depreciation is generally split into two distinct categories:

1. Capital Works (Division 43): This refers to the structural elements of the building itself. It includes man-made items such as the brickwork, concrete, roofing, glazing, and even tiles. For most residential properties, these are typically depreciated over a period of 40 years.
2. Plant and Equipment (Division 40): These are the removable or mechanical assets within the property. This includes things like ovens, rangehoods, air conditioning units, hot water systems, and carpets. Because these items have a shorter lifespan than the building structure, they can often be written off much faster.

Why Every Investor Needs a Professional Schedule

Many investors ask if it is truly worth the investment to hire a professional. Tuan’s personal experience proves that the answer is a resounding yes. Early in his journey, on a modest income of $65,000, his first depreciation report provided him with $15,000 in tax deductions, resulting in an $8,000 tax refund.

The Role of the Quantity Surveyor

To claim these deductions, the ATO requires a report prepared by a registered and qualified Quantity Surveyor. These experts are construction cost consultants who specialize in identifying every depreciable asset in a property.

The benefits are clear:

• Maximised Deductions: Professionals know exactly what can be claimed, from the mechanical life of an oven to the 40-year lifespan of a structural wall.
• Compliance: Using a registered surveyor ensures your claims meet strict ATO guidelines.
• Tax-Deductible Fee: The cost of the report itself is 100% tax-deductible in the year it is purchased.

Note on Interstate Variation: While federal income tax and depreciation laws are consistent across Australia, other property-related costs such as Stamp Duty, Land Tax, and Payroll Tax vary significantly between Australian states and territories. 

Always seek specific advice for the region where your property is located.

Debunking Common Depreciation Myths

“My property is too old to claim anything.”

This is one of the most common misconceptions. While 2017 legislation changes limited claims on “second-hand” plant and equipment for residential properties, you can often still claim the Capital Works (structural) component on older buildings. Furthermore, for commercial properties, you can still claim depreciation on second-hand assets like old carpet or fit-outs, regardless of the building’s age.

“Residential and Commercial rules are the same.”

There are key differences in how “aggressive” your depreciation can be. While residential properties are generally depreciated over 40 years, certain commercial spaces—like hotels, motels, or manufacturing facilities—can have their depreciation period reduced to 25 years due to the higher intensity of use and wear.

Lessons in Growth: From Garage Startup to Industry Leader

Tuan’s success didn’t happen overnight. It was built on a foundation of grit and a willingness to embrace the “grind” of small business.

Overcoming the Fear of Rejection

Early in his business, Tuan spent his Saturdays “pounding the pavement,” handing out pamphlets at open houses. He faced constant rejection but remained focused on the “long picture”. His advice to other business owners? Persistence always outdoes raw quality alone. “If you make 1,000 door knocks, it’s that 1,001st knock that might convert,” he says.

Building a Culture of Inclusivity

As Duo Tax grew, Tuan realised that as a leader, he had to take full responsibility for his team and processes. He implemented the “Einstein Awards” to encourage even the most introverted staff members to share their ideas for improving the business. By giving every employee a voice and celebrating their contributions, he transformed his staff into active “intrapreneurs” who are personally invested in the company’s mission.

Frequently Asked Questions (FAQ)

What exactly is a tax depreciation schedule?

It is a comprehensive report prepared by a registered Quantity Surveyor that identifies all the structural and internal assets of an investment property. It outlines the specific yearly deductions you can claim to reduce your taxable income.

Can I claim depreciation on an older investment property?

Yes. While you generally cannot claim “Plant and Equipment” (like old appliances) on second-hand residential properties bought after May 2017, you can still claim “Capital Works” (the structure) if the building meets certain age requirements set by the ATO.

Is the cost of the depreciation report worth it?

In almost every case, yes. Not only do the resulting tax savings often far outweigh the cost of the report, but the fee paid to the Quantity Surveyor is itself 100% tax-deductible.

How do I know which assets are depreciable?

Broadly, anything man-made is depreciable, including the building structure (Division 43) and removable items like ovens and carpets (Division 40). Organic items like landscaping and softscaping are generally not claimable.

Take Control of Your Property Strategy

Whether you are a first-time investor or a seasoned business owner looking to scale, understanding the technical and strategic sides of your finances is the key to success. At Latitude Accountants, we are more than just bookkeepers; we are your strategic partners in growth.

We pride ourselves on helping small business heroes navigate the complexities of Australian tax law while building sustainable, people-focused businesses.

Contact the expert team at Latitude Accountants today for strategic accounting and business advice tailored to your specific situation. Let’s work together to maximise your cash flow and build your legacy.

• • Phone: 1300706597
  • Email: info@latitudeaccountants.com.au
  • Book online via our website.
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Disclaimer

The information provided in this blog post is general in nature and does not constitute personal financial or tax advice. Australian tax laws (such as GST, PAYG, and Superannuation) are complex, and state-based taxes like Stamp Duty and Land Tax vary interstate. Readers should seek professional advice regarding their specific circumstances from a qualified accountant or tax agent.