When you invest in a property, you own two things that behave very differently. One is the land. The other is the building on it. I have found that once people see the two separately, a lot of decisions become clearer.
The title is shorthand, not a promise. Here is what sits behind it.
The building wears out
A building ages from the day it is finished. Roofs, kitchens, carpets and hot water systems wear out and need replacing. The tax system recognises this. For a home built after mid-September 1987, an investor can usually claim the cost of the building itself over forty years, at 2.5 per cent a year. Fittings such as appliances and carpets are claimed over their own shorter lives. In a home that someone had already lived in or let, an investor who bought it after 9 May 2017 generally cannot claim the fittings that came with it.
A quantity surveyor prepares a depreciation schedule that sets these amounts out. The deductions lower the tax paid each year. The claims for the building also lower its cost base, so more of the gain is taxed when the property is sold.
The land does not wear out
Land does not need a new roof, and it does not date. What it offers is position: how close it is to work, schools, transport, water and the things people want to be near. Over long periods, much of the change in a property's value has come from the land rather than the building. That is history, not a promise. Land values can fall as well as rise, and no one can say what they will do next.
Why the balance matters
Every property carries a different share of land and building. A house on its own block carries a large share of land. An apartment in a tall building carries very little, because the land is shared by many owners. A brand new home carries more building, with more to claim. An older home on a good block carries more land, with less to claim.
Neither is right in general. A new building's deductions may help one person carry the costs; another may want more of what they hold to sit in the land. Now that the 2026 tax changes favour new builds, that trade-off matters more than ever.
Where it goes wrong
Looking only at the land can lead someone to stretch for a block they cannot comfortably hold. Looking only at the deductions can lead someone to a property that is almost all building. If the weekly cost is already tight, the balance between the two matters less than whether you can hold the property through the years.
The questions I would ask
- How much of this property's price is land, and how much is building?
- How old is the building, and what will need replacing in the next ten years?
- What does the depreciation schedule show, and for how long?
- What is it about this land that people will want, and what could change that?
- Can you comfortably hold the property for the years it takes?
The building is what your tenant lives in. The land is what it sits on. Knowing which one you are paying for is where a sound decision starts.
Nicholas Lockhart
General information only. No advice is given. This article reflects the tax rules as at 10 October 2026. An accountant and a quantity surveyor can confirm what applies to a particular property.
Source: Income Tax Assessment Act 1997, Divisions 40 and 43.