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Ask Rider Accountants About How to Claim a Landscaping Tax Deduction
Is land depreciable?
For tax purposes, land is considered to have an unlimited effective life and does not decline in value through use. As a result, land is specifically excluded from depreciation deductions.
What can be depreciated are assets constructed on the land that have a limited effective life. These fall into two categories:
- Capital works (Division 43) – structural improvements
- Plant and equipment (Division 40) – mechanical or functional assets
Landscaping often combines all three elements, which is why it’s commonly misunderstood.
Hard landscaping vs soft landscaping
Understanding the difference between hard and soft landscaping is critical when assessing depreciation eligibility.
Hard landscaping refers to constructed, structural or functional elements. These may qualify for depreciation.
Soft landscaping refers to natural elements such as plants and soil. These are not depreciable.
This distinction underpins most ATO decisions relating to landscaping depreciation.
What landscaping items can be depreciated?
The following landscaping components may qualify for depreciation, depending on their nature and use:
- Structural retaining walls
- Concrete paths and driveways
- Pools and permanent surrounds
- Structural pergolas and decks
- Fencing
- Irrigation pumps and controllers
- Garden and exterior lighting
- Pool equipment and motors
Structural items are typically claimed as capital works at 2.5 per cent per year, while easily removable or mechanical assets are depreciated as plant and equipment over their effective life.
The importance of cost segregation in landscaping depreciation
Landscaping works are rarely itemised clearly in construction or renovation documents. Without proper cost segregation, investors often underclaim or misclassify deductions.
A quantity surveyor can:
- Separate depreciable assets from non-depreciable land costs
- Allocate costs accurately between divisions
- Apply correct depreciation rates and effective lives
- Ensure claims align with ATO legislation
This process is critical for both maximising deductions and maintaining compliance.
Key ATO rules investors often miss
Several ATO rules frequently affect landscaping claims:
- Depreciation can apply even if the current owner did not pay for the work
- Structural improvements constructed after 26 February 1992 may still be eligible
- Older properties can still qualify due to later upgrades
- Missing invoices do not prevent a claim because costs can be reasonably estimated by a quantity surveyor
These rules often result in missed deductions when landscaping is not assessed properly.
Why You MUST Engage a Tax Accountant
Landscaping can do more than boost the street appeal of your investment property or Airbnb rental, it can boost your tax deductions too. While plants and turf aren’t claimable, many hard landscaping features are. Because these are often bundled into one project, deductions are easy to miss. A professional depreciation schedule provided via Rider Accountants ensures you claim what you’re entitled to, stay compliant and get the most value from your investment.
Landscaping and construction expenditure explained
Under Subsection 43-70(2) of the Income Tax Assessment Act 1997, expenditure on landscaping itself is excluded from capital works deductions.
This means the process of landscaping, including preparing or altering the land, is not deductible.
Examples of non-deductible landscaping expenditure include:
- Clearing and levelling
- Earthworks and excavation
- Soil preparation
- Removing or relocating trees
- General land shaping
- Drainage works not forming part of a depreciable structure
However, some of the above works may still qualify for depreciation if they relate directly to the construction of division 43 capital works and meet the relevant criteria.
What landscaping items cannot be depreciated?
The following items are not depreciable under any division:
- Plants, trees and shrubs
- Turf and grass
- Soil, mulch and garden beds
- Gravel and loose stones
While plants and these other elements may improve a property’s appeal, they are treated as part of the land for tax purposes.
Grey areas that commonly lead to incorrect claims
Certain landscaping elements regularly cause confusion, including:
- Distinguishing retaining walls from earthworks
- Pool areas containing both depreciable and non-depreciable components
- Decks integrated with landscaping
- Mixed projects combining structural works and land preparation
For example, while a pool and equipment may be depreciable, surrounding turf and vegetation works are not. Pool areas are one of the most common areas of misclassification.
Landscaping depreciation in strata-managed properties
In strata properties, landscaping is often classified as common property.
Eligible depreciation may apply to:
- Shared driveways and pathways
- Pool and outdoor common areas
- Retaining walls and boundary structures
Deductions are apportioned based on unit entitlement and because costs are rarely itemised, landscaping depreciation in strata properties is frequently overlooked.
