How Does Airbnb Depreciation Work?

By Jess Murray CPA, Registered Tax Agent & Airbnb Tax Specialist

Airbnb depreciation is one of the most daunting tax concepts for short-term rental hosts. New hosts often spend significant money furnishing and setting up their property to create a great guest experience. But when it comes to claiming these assets on their tax return, many feel unsure how to access depreciation claims. This article explains how depreciation for Airbnb works in clear, practical terms, so you can understand how your asset choices affect your tax position.

Unlike everyday expenses, depreciation doesn’t give you an immediate deduction. Instead, it spreads the cost of certain purchases over time, reflecting how those items are used to earn Airbnb income.

For Airbnb hosts, depreciation falls into two distinct categories: capital allowance, which applies to assets like furniture and appliances, and capital works, which applies to structural improvements and renovations. By understanding this difference, you can make more informed decisions when buying, upgrading, or renovating for your Airbnb, and manage your end-of-year Airbnb taxes with confidence

EasyBnbTax is an Australian tax firm. We’ve written this article specifically for Aussie Airbnb hosts, using Australian tax law and Australian Tax Office requirements for Airbnb. If you’re based in a different country, this information won’t apply to you.

Table of Contents

• Depreciable Assets and Capital Allowance for Airbnb >
• Capital Works for Airbnb >
• Quantity Surveyor’s Reports for Airbnb – Is It Worth It? >
• Repairs vs Assets vs Capital Works – How To Tell The Difference >
• Airbnb Apportionment and Depreciation >
• How To Manage Your Airbnb Depreciation >
• FAQ’s for Airbnb Depreciation in Australia >

Depreciable Assets and Capital Allowance for Airbnb

The first of the two categories of Airbnb depreciation is Capital Allowance, which applies to depreciable assets. 

What Is A Depreciable Asset?

For tax purposes, a depreciable asset is a physical item with a few key characteristics:

• It has an ongoing use (e.g. fridge), as opposed to being a consumable that is used up (e.g. food)
• It can be removed without damaging the property (e.g. a hanging mirror, as opposed to a permanently fixed mirror)
• It retains its individual character as opposed to becoming part of the building itself (e.g. a dishwasher is still perceived as its own ‘thing’, whereas a kitchen cabinet just becomes part of ‘the kitchen’ or ‘the house’)
• If an asset has electronics or a motor, it is always a depreciable asset, even if it would otherwise be classed as part of the building. For example, an air conditioner perhaps couldn’t be removed from a house without damage, but because it has a motor, it is still a depreciable asset.

Common depreciable assets in an Airbnb include:

• beds and mattresses
• couches and sofas
• dining tables and chairs
• refrigerators and freezers
• washing machines and dryers
• dishwashers
• ovens, cooktops and rangehoods
• televisions
• air conditioners and heaters
• outdoor furniture sets

In the rental property schedule of your tax return, this kind of depreciation is referred to as Capital Allowances. You may also see it referred to as depreciation on Plant & Equipment, or Division 40 depreciation. 

How Is Airbnb Depreciation Calculated?

Depreciation is the method the tax system uses to spread the cost of an asset over its useful life, rather than allowing the full cost to be claimed upfront. It reflects the idea that assets wear out, become obsolete, or lose value over time as they’re used to earn income.

For Airbnb assets, depreciation is usually calculated using the diminishing value method. Under this method, you claim a higher deduction in the earlier years of an asset’s life, with the deduction reducing over time. There is an alternative method called the prime cost method, which spreads deductions evenly across the asset’s life, but this is rarely used in practice because the diminishing value method typically produces a better tax outcome overall. 

The rate at which an asset is depreciated depends on its effective life. The effective life is the period the Australian Taxation Office estimates the asset can be used to produce income. The ATO publishes effective lifes for common assets, such as furniture, appliances and equipment. These effective lives are used to calculate the annual depreciation rate. You can find them at the end of the ATO’s Rental Properties Guide.

In the year an asset is purchased, depreciation is apportioned by days starting from the date the asset was first ‘installed and ready for use’. For an asset purchased during the Airbnb setup phase, the ‘installed and ready for use’ date is the date the property first became available for rent. Assets purchased earlier don’t start depreciating until the Airbnb itself is available to earn income. 

Here’s a simple example of how the depreciation calculation works, taking a TV purchased for an Airbnb:

• Purchase Price = $1,000
• Purchase Date = 1st of April
• Apportionment in the first year = 91 days
• ATO’s effective life for a TV = 10 years

As you can see, the depreciation is apportioned in the first year, highest in the second, and then the tax benefits taper off gradually over time.

Put together, depreciation depends on three things: the cost of the asset, its effective life, and the number of days it’s used for Airbnb in that year. Once these are known, the annual deduction can be calculated.

Low-Cost Assets – The $300/$600 Rule

Low-cost assets don’t have to be depreciated. Instead, the ATO allows low-cost depreciable assets to be claimed in full in the year they were installed and ready for use. This gives Airbnb hosts a cashflow benefit, as they receive their whole tax deduction up front, rather than having it stretch out over years.

An asset is considered low cost if it costs less than $300 per property owner. For single-owner properties, this means a $300 threshold, while for jointly owned properties, the threshold effectively becomes $600 per asset. Importantly, items that are designed to be used as a set, such as dining chairs or a linen set, must be counted as one asset for this test. 

Common low-cost Airbnb assets include:

• kitchenware and small appliances
• lamps and small electrical items
• décor items
• low-cost furniture and linen
• household equipment used by guests
  

Again, the timing of the tax deduction is tied to when the product is installed and ready for use. For a low-cost asset purchased during the Airbnb setup phase, this will be the date the property becomes available, while for an asset purchased after the Airbnb is up and running, the deduction occurs when the asset is placed in the Airbnb and ready for guests to use.

In the rental property schedule of your tax return, low-cost assets are also claimed under Capital Allowances.

Brand-New Asset Rules For Airbnb

The ATO had an important caveat for depreciable assets (including low-cost assets) in residential rental properties, including Airbnbs. They only allow depreciation deductions for brand-new assets, which means second-hand assets are not tax-deductible. 

This means you can only claim depreciation on items that were brand new when you purchased them. In other words, their very first use must have been in the course of earning rental income, not in your own home or by anyone else. Assets that were previously used privately in your own home, or bought second-hand, are not deductible under ATO rules. 

That said, the savings that come from buying second-hand furniture or using existing household items can often outweigh the tax benefit of buying new, so buying second-hand can still be a smart strategy for reducing costs for your Airbnb. But it’s important to understand that when buying second-hand, or using items that were previously used in your own home, a tax deduction won’t be available.

Based on this rule, there are a few practical tax tips to keep in mind, particularly for assets purchased in the Airbnb setup phase. Be sure to avoid using your Airbnb assets yourself before your first guest arrives. A “test stay” would be treated by the ATO as private use, meaning all newly-purchased assets would become non-deductible. Similarly, if there’s a long gap between purchasing new items and your first guest, the ATO may question whether the assets were still brand new when income began. Consider keeping items in their original packaging until right before your first booking, and take photos as evidence.

Capital Works For Airbnb

While depreciable assets are separate items that can be removed and replaced over time, capital works relate to the structure of the property itself. Renovations and improvements made to a property are treated differently for tax and are claimed over a much longer period of time.

What Are Capital Works For Airbnb?

Capital works are expenses that relate to the structure of the property itself. A capital works asset can be identified by these characteristics:

• It is fixed in place and can’t be easily removed without damaging the property
• Replacing the asset would typically be called a renovation, as opposed to a simple switch.
• It forms part of the home, such that you would consider the house to be incomplete without it
• It tends to lose its own standalone identity and becomes part of something bigger, for example, kitchen cabinets become part of the kitchen.  

An exception applies for assets that have electronics or a motor, which are always classed as depreciating assets. For example, an air conditioner perhaps couldn’t be removed from a house without damage, but because it has a motor, it is still a depreciable asset.

Common capital works assets in an Airbnb include:

• The structure of the building itself, including walls and the roof
• Kitchen cabinets, benchtops and splashbacks
• Bathroom cabinets, sinks and tapware
• Built-in cabinetry, wardrobes and storage
• Fixed flooring, such as hardwood floors or tiles
• Plumbing and electrical work within walls
• External structures, including garages, verandahs, pergolas, decks and sheds

Repairs vs Improvements

A common trap for Airbnb hosts is the difference between repairs and improvements. Repairs can be claimed up front, while improvements must be claimed under capital works rules over a number of years.

• A repair restores a property or asset that is damaged or worn out back to its original condition. It does not improve the property or asset, upgrade it, or change its function. To be classed as a repair, it must still be fundamentally the same original asset.
• An improvement goes beyond restoring the original condition. It improves or upgrades the property or asset. Improvements to buildings and other capital works assets must be claimed under capital works rules, they cannot be claimed up front as a repair. Similarly, improvements to depreciable assets must be claimed under depreciable asset rules, not as repairs.

Examples of repairs that may be claimed up front:

• Fixing a leaking tap
• Repairing a broken door
• Replacing damaged tiles
• Replacing a damaged section of fencing or decking
• Patching and repainting walls due to wear and tear.

Examples of improvements that are claimed as capital works:

• Replacing an old kitchen with a new or upgraded kitchen
• Renovating or modernising a bathroom
• Installing new flooring where old flooring is removed
• Adding air conditioning where none previously existed
• Reconfiguring rooms by removing or adding walls
• Extending or building a new deck or pergola

For more on claiming deductions for repairs, jump to our article on Claiming Repairs for Airbnb.

How Airbnb Capital Works Are Claimed

Like depreciable assets, capital works are not deducted upfront. Instead, they are claimed gradually over time, reflecting the long-term nature of structural improvements to the property.

However, unlike depreciable assets, which use a diminishing value calculation based on the effective life of the particular asset, capital works are claimed at a flat rate of 2.5% per year, over 40 years. 

In the first year, capital works claims are also apportioned by days. For capital works costs incurred during Airbnb setup, deductions start on the date the property is first available for rent. For capital works after the Airbnb is live, deductions start from the date the works are completed, not the date they were paid for.

Quantity Surveyor’s Reports for Airbnb

If your Airbnb property was built less than 40 years ago, there may be capital works deductions available on the original construction and any renovations or improvements. In practice, however, most Airbnb owners don’t have access to the construction cost details needed to calculate these deductions accurately, particularly if the property was purchased from someone else.

A quantity surveyor report is the ATO-approved way to access capital works depreciation in these situations. A qualified quantity surveyor evaluates the property and estimates its construction and structural costs. They then prepare a depreciation schedule that sets out the capital works deductions you can claim each year for your Airbnb. Where original cost records don’t exist, this is the only method the ATO accepts for claiming capital works depreciation.

It’s important to note that unless the property is newly built and its very first use will be as an Airbnb, the report will only unlock capital works depreciation, not depreciation on assets. This is because the depreciating assets are classed as second-hand, therefore aren’t tax-deductible.

Are Quantity Surveyor Reports Actually Worth It For Airbnb?

Is it worth getting a quantity surveyor report for Airbnb? It depends on the specifics of your property and on your own tax position. Key factors include the age of the building, the scale of construction or renovation costs, and your marginal tax rate. The higher the underlying capital works value and the higher your tax rate, the more valuable the deductions will be in real dollar terms.

A handy way to assess this is to use an online calculator. By inputting some general details about your home, you can get an estimate of the annual capital works deduction that your Airbnb might be entitled to. The calculators on the BMT Quantity Surveyors website are a great example. They show an estimated depreciation range as well as the after-tax benefit. You can then compare this to the cost of the report and assess the likely payback period.

The cost of a quantity surveyor report varies, and while firms like BMT are well known, they can be expensive, so it’s often worth shopping around. Search for quantity surveyors in your local area, compare pricing, and ask for an indication of whether your Airbnb is likely to generate enough depreciation to justify the cost. For many Airbnb properties, the payback period is within one to two years, after which the deductions continue to provide a tax boost each year.

Renovations are another situation where a quantity surveyor’s report can be particularly useful for maximising your Airbnb depreciation deductions. If you’ve carried out renovations, the quantity surveyor can incorporate those works into the report. They’ll handle the classification and start dates for you, which removes a bunch of complexity. This simplifies record-keeping and ensures capital works depreciation is calculated consistently from the outset.

A quantity surveyor’s report is optional, but for many Airbnb hosts it can be a worthwhile investment. The decision comes down to weighing the upfront cost of the report against the long-term value of the deductions it unlocks. When the numbers stack up, a report can turn otherwise missed deductions into a reliable, ongoing tax benefit.

Repairs vs Assets vs Capital Works – How To Tell The Difference

The distinctions between these types of expenses can be fuzzy. In cases that are unclear, here are questions you can ask to distinguish between a repair, an improvement or a new asset:

Is it a repair?

Is the original item still there after the work is done? If so, it will be a repair. If the original item has been completely removed and replaced, it is not a repair.

Has the work restored something, or made it better than it was before? – Restoring points to a repair. Making it better, newer or more functional points to an improvement or a new asset.

Would you describe the work as a fix or patch-up, or as a renovation or upgrade? – Work you’d naturally call a renovation or upgrade is not a repair for tax purposes. Instead, it will be an improvement under capital works, or a depreciable asset.

Did the damage or wear occur while the property was earning Airbnb income? – If the damage existed before Airbnb use, fixing it is not a deductible repair. It may be capital works, more on this below.

If it’s not a repair, is it capital works or a depreciable asset?

Is the item fixed in place, or can it be removed without damaging the property? Items that are fixed in place and form part of the structure of the property are usually capital works. Items that can be removed and replaced without damage are more likely to be depreciable assets. For example, a mirror that is fixed to a wall will be capital works, while a hanging mirror will be a depreciable asset.

Does the item have its own standalone identity, or does it become part of something bigger? If the item loses its individual identity and becomes part of the building, such as cabinetry becoming part of a kitchen, it is capital works. If it remains a separately identifiable item, such as a dishwasher, it is a depreciable asset.

It is an electrical appliance, or does it have a motor? These assets are always depreciable assets. Examples include air conditioners, heaters, hot water services, solar panels, garage roller doors, stoves and ovens.  

Airbnb Apportionment and Depreciation

When claiming tax deductions for Airbnb, the Australian Taxation Office only allows claims for the portion of your expenses that relate to earning taxable income. The challenge is that, unlike traditional rental properties, Airbnbs often have a mix of income-producing use and private use, which must be adjusted for. 

Many Airbnb hosts live in their property, share common areas with guests, block out dates for personal use, or only make the property available part-time. Without apportionment to adjust for these situations, hosts would be unfairly claiming tax deductions for their own private home use. 

Two Apportionment Factors: Time and Space

The first of the two apportionment factors that Airbnb hosts must consider is time. For hosts who rent out the home they live in, depreciation is based on the percentage of days that guests actually stay, not the days the listing is merely visible online. If there are no guests in the property, the ATO treats that period as private use, even if a guest room sits empty. For Airbnbs that are not the owner’s own home, depreciation is instead apportioned based on the number of days the property is genuinely available for rent. This distinction is critical because it can significantly change how much depreciation you are entitled to claim each year.

The second apportionment factor is space. Where guests only use part of a property, depreciation must be adjusted to reflect how much of the home is set aside for income-producing use. In a shared home, this means separately identifying guest-only areas, shared areas, and private areas, with shared spaces only partly deductible. For properties like granny flats or studios, the calculation often focuses on the proportion of the overall property that the Airbnb occupies. The goal is not precision to the centimetre, but a reasonable and supportable estimate that reflects real-world use.

Applying Apportionment To Depreciation Deductions

Each of these apportionment factors results in a deductible percentage. For expenses that require apportionment, including depreciation on many assets, the ATO requires both the time-based percentage and the space-based percentage to be applied together. This ensures that deductions are limited to the portion of the asset that is genuinely used to earn Airbnb income. 

Apportionment is a complex topic in its own right. The exact rules depend heavily on how your Airbnb is set up and on how it is used throughout the year. For this reason, we’ve covered this topic in much more detail in a separate article dedicated entirely to Airbnb apportionment, with step-by-step explanations of how to calculate your apportionment percentages correctly.

How To Manage Your Airbnb Depreciation

When it comes to actually handling your Airbnb depreciation claims, there are a few different approaches to consider. 

Handle It Yourself With The Ultimate Airbnb Spreadsheet

The calculations required to claim depreciation for an Airbnb are complex. Each asset has multiple variables that affect the calculation, and values must be carried forward and recalculated each year. Once you have more than a handful of assets, manual tracking becomes impractical and error-prone, and a spreadsheet or software is essential.

The EasyBnbTax Ultimate Airbnb Spreadsheet is designed specifically for Airbnb hosts to handle these calculations for you. It includes a built-in depreciation schedule that covers both capital allowance assets and capital works, the correct ATO effective lives and depreciation rates already built in. Enter each asset once, and the spreadsheet automatically calculates the correct depreciation each year, including apportionment and first-year adjustments. Crucially, the spreadsheet also handles your time and floor-space apportionment, so only the deductible portion of each asset is claimed. 

Beyond depreciation, the spreadsheet also acts as a complete Airbnb tax system. You can track income and expenses throughout the year, see how your profit or loss is tracking in real time, and generate clean end-of-year totals that align directly with the rental schedule in MyGov so you can lodge your own tax return with confidence. Or if you use an accountant, you can hand over a clear, structured summary that saves time and reduces fees.

Learn more and see what’s included on the EasyBnbTax Ultimate Airbnb Spreadsheet information page.

Get A Proper Understanding With The EasyBnbTax Complete Online Course

While the spreadsheet handles the calculations, understanding the rules behind them is just as important. If you’re looking for a deeper understanding of how to manage your Airbnb taxes, that’s exactly what the EasyBnbTax Complete Online Course is designed to deliver. 

This course walks you through everything you need to manage your Airbnb taxes from start to finish. Setup costs, deductions, depreciation, apportionment and bookkeeping are all covered step by step, using plain English and real Airbnb examples. You learn not just what to do, but why you’re doing it.

The course includes 30+ video lessons, the full version of the Ultimate Airbnb Spreadsheet with lifetime updates, a step-by-step MyTax walkthrough so you can lodge your own tax return, and ongoing support. And it’s 100% tax deductible. This course is a smart financial decision for new Airbnb hosts. It pays for itself by teaching you to maximise your legitimate tax deductions, showing you all the common mistakes to avoid, and empowering you to lodge your Airbnb tax return if you choose. 

If you want to feel confident managing your Airbnb taxes, the EasyBnbTax Complete Online Course is a smart solution. Learn more on our course information page, which includes a free sneak peek video lesson with some handy tax deduction tips.

Hand It To An Expert With The EasyBnbTax Express Tax Service

If you’d rather hand everything over to an expert and know it’s been done right, the EasyBnbTax Express Tax Service allows you to have your Airbnb tax return prepared and lodged by an Airbnb tax specialist who works exclusively with short-term rental hosts. This option is especially recommended in the first year of your Airbnb, when setup costs are complex, many new assets have been purchased, and it’s critical to get your depreciation schedule correct from the start. With expert handling of depreciation, repairs, improvements, apportionment and mixed use, you can be confident your deductions are maximised, and your tax return is done right.

See how it works, pricing, and what documents you’ll need handy on our EasyBnbtax Express Tax information page.

Key Depreciation Takeaways for Airbnb Hosts

Thoughtful furnishing and well-chosen assets do more than just fill a space. They shape guest comfort, influence reviews, and ultimately support the long-term success of your Airbnb. Making sure those same assets are treated correctly for tax means the money you invest is working for you on both fronts.

Depreciation isn’t always simple, but it becomes far less daunting once you understand the basics. When you know how assets are classified and how tax benefits will flow back to you over time, you can make smarter purchasing decisions that ultimately support the profitability of your Airbnb.

All of this hinges on having the right understanding of the ATO’s rules and the right tracking systems in place early. Then, instead of wrestling with your depreciation schedule each year, depreciation becomes a predictable part of managing your Airbnb finances. You’ll have confidence that your tax return is accurate, and your Airbnb tax deductions are maximised.

FAQ’s for Airbnb Depreciation in Australia

What is Airbnb depreciation?

Airbnb depreciation is the ATO’s permitted method of claiming tax deductions for assets and building improvements. It spreads the tax deduction over the asset’s useful life to reflect its gradual wear and use, rather than claiming all at once. It applies to items used to earn Airbnb income, such as furniture, appliances, renovations and structural improvements. 

How is Airbnb depreciation calculated?

Airbnb depreciation is calculated using the asset’s cost, its ATO-set effective life, and how long it’s used to earn Airbnb income during the year. Most assets use the diminishing value method, which gives larger deductions in earlier years, tapering off over time. In the first year, deductions are apportioned based on when the asset was installed and ready for use.

Can I claim second-hand furniture in my Airbnb?

No. The ATO does not allow depreciation on second-hand assets in residential rental properties, including Airbnbs. This includes furniture, appliances, or equipment that were previously used in your own home, or that were purchased second-hand. While buying second-hand can still make financial sense, a depreciation deduction will not be available for those items.

What is the $300 rule for Airbnb depreciation?

The $300 rule allows low-cost depreciable assets to be claimed in full in the year they are installed and ready for use, rather than being depreciated over time. The threshold is $300 per owner, meaning $600 for jointly owned properties. Items that form a set, such as dining chairs, must be treated as a single asset.

Can I claim the Instant Asset Write Off for Airbnb assets?

No. The Instant Asset Write Off applies to eligible businesses, not to residential rental properties like Airbnb. Airbnb assets are instead claimed under standard depreciation rules, or the $300 low-cost asset rule, where applicable. Even if your Airbnb feels business-like, the vast majority of Airbnbs are classed by the ATO as rental properties, not businesses.

What is the difference between capital allowance and capital works for Airbnb?

Capital allowance applies to removable assets such as furniture and appliances, which are depreciated according to effective life. Capital works applies to structural elements of the property, including walls, fixed cabinetry, flooring, and renovations, which are claimed at a flat rate over a long period, usually 40 years.

What is capital works depreciation for Airbnb?

Capital works depreciation applies to the structural parts of an Airbnb property, as well as renovations or improvements. These costs are claimed at 2.5% per year over 40 years. Examples of capital works assets include kitchen cabinets, bathroom fixtures, fixed flooring, decking and sheds.

How do I claim renovations for my Airbnb?

Renovations are generally claimed as capital works, not as upfront deductions. The cost is spread over time at 2.5% per year, and the deduction commences once the Airbnb is available for rent or the renovation is completed. Accurate classification is critical, as some components, such as kitchen appliances, may actually be depreciable assets that can be claimed at a faster rate.

What is the difference between repairs and renovations for Airbnb?

A repair restores damage or deterioration to bring something back to its original condition. Repairs can be claimed as an upfront deduction. Renovations improve, upgrade, or replace something entirely. These must be claimed over time as capital works or depreciable assets. If the original item is improved, it’s not a repair, even if the work feels minor. Like-for-like replacements are always treated as new assets.

What is a quantity surveyor report for Airbnb?

A quantity surveyor’s report is a depreciation schedule prepared by a qualified quantity surveyor. It estimates the construction and structural costs of a property and sets out the capital works deductions you can claim each year. Where original construction records are unavailable, this is the only ATO-approved way to access capital works depreciation.

Do I need a quantity surveyor for Airbnb?

A quantity surveyor is not mandatory. But without one, you generally can’t claim capital works depreciation unless you have detailed construction cost records. For most Airbnb owners, especially where the property was purchased rather than built, a quantity surveyor report is required to access building depreciation deductions.

Is a quantity surveyor report worth it for Airbnb?

Whether a quantity surveyor report is worth it depends on the age of the property, the value of construction or renovations, and your marginal tax rate. If the property is less than 40 years old, it is often worthwhile, with most hosts recovering the cost of the report within one to three years. Online calculators can help estimate the tax savings to see whether the numbers stack up.

Questions? Thoughts? Pop them in the comments below and I’ll get right back to you!

Happy hosting! – Jess