I am considering replacing 2 very old split system air conditioning units in my rental property with ducted reverse cycle air conditioning. However I’m not
clear what tax depreciation applies to the ducted air conditioning unit itself. - is it air conditioning “plant” or air conditioning “assets” as there are some very different deduction values.
Ir conditioning is an asset, that is classified as plant and equipment. The depreciation rate for residential property operators air conditioning assets is contained in taxation Ruling TR 2022/1.
Hi@KevColl thanks for the quick reply. I had a look at the ruling and it is much clearer than what is in the residential rental property guidelines. So given the life of the ducted system is recognized as 15 years, then if I use the diminishing value method, I could front load the depreciation of the cost of the unit at up to 30%, and electrical, vents ducting etc at 2.5% under capital work?
The system is all inclusive as one part does not function without the others, the total cost of the system including installation is depreciated as one either prime cost or diminishing value, not capital works.
Can you cite any references @KevColl to justify this position?
My invoice does not breakdown the costs of unit vs ducting/labour. My accountant is advising that I can only depreciate at 2.5%.
@KevColl I was wondering about this as well. I've installed ducted central heating/cooling in my rental property last FY. I looked at TR 2022/1 page 224. In residential property assets it says, it says "Air conditioning assets (excluding ducting, pipes and vents)" which infers that the ducting, pipes and vents are capital works?
I also, checked here: https://www.ato.gov.au/forms-and-instructions/rental-properties-2025/residential-rental-property-assets/residential-rental-property-items. Table 5 Air Conditioning Assets also mentions air conditioning ducts, pipes and vents are capital works, so I'm not sure how to properly claim for this now reading through this thread.
For tax purposes, a ducted system is a claimable asset that falls under Plant and Equipment. This means you’ve basically got two options for the deductions: the Prime Cost method, which spreads the claim evenly over time, or Diminishing Value, which front-loads your tax break in the first few years. Most investors choose the front-loaded option to boost their immediate cash flow, but a solid depreciation schedule will outline both so you can pick what works best for your specific situation.
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