Understanding depreciation on medical equipment in healthcare facilities

Medical equipment depreciation refers to the tax deduction available for the decline in value of eligible equipment used in an income-producing medical or healthcare setting. As equipment ages and wears through use, the Australian Taxation Office (ATO) allows owners to claim this loss in value over time as a deduction.

In medical properties, depreciation commonly applies to high-cost, specialised assets that are integral to the delivery of healthcare services. These deductions are claimed under Division 40 – plant and equipment, which covers assets that are not part of the building’s permanent structure.

Medical equipment typically includes assets that are removable, mechanical or operational in nature. Common examples include:

Each item must be assessed individually to determine whether it qualifies as plant and equipment and whether it is eligible for depreciation.

Importantly, medical equipment should not be confused with building elements or fixed structural items. Misclassifying assets can result in incorrect depreciation claims and compliance risk.

Medical facilities often contain a mix of depreciable assets across two categories:

Division 40 – Plant and equipment

This includes medical equipment and other removable or mechanical assets. These items are depreciated over their effective life, with the depreciation rate for medical equipment varying depending on the asset type and its expected useful life.

Division 43 – Capital works

This applies to the building structure and permanently fixed elements, such as walls, floors, ceilings and structural fit-outs. Capital works are generally claimed at 2.5 per cent per year over forty years, where eligibility criteria are met.

Correctly separating medical equipment (Division 40) from capital works (Division 43) is critical. Errors in this area are common, particularly where specialised fit-outs blur the line between structure and equipment.

There is no single depreciation rate for medical equipment. The applicable rate depends on the asset’s effective life, which may be:

For example, diagnostic imaging equipment will generally have a different effective life to dental equipment or laboratory machinery. Once the effective life is established, depreciation can be calculated using either the diminishing value method or the prime cost method, subject to tax strategy and eligibility.

Applying an incorrect effective life or method can significantly understate or overstate deductions, exposing owners to audit risk.

Depreciation on medical equipment can generally be claimed by:

Eligibility depends on ownership, use, and whether the equipment is installed in an income-producing context. Lease structures, fit-out arrangements and tenant incentives can all affect who is entitled to claim the depreciation.

This is a common area of confusion and requires careful review.

Medical equipment is not standard commercial plant. It is specialised, high-value and often custom-installed. As a result, accurate depreciation requires:

Specialist quantity surveyors are recognised by the ATO as appropriately qualified to assess construction costs and depreciable assets for tax purposes. This is particularly important where original cost information is unavailable or incomplete, which is common in medical properties.

Medical equipment depreciation is one of the most technically complex areas of property-related tax depreciation. Frequent errors include:

These mistakes often result in conservative claims that fall well short of what is legally available.

Depreciation on medical equipment represents a substantial and often underutilised tax deduction for medical property owners and investors. There is no standard depreciation rate for medical equipment, and applying generic assumptions can lead to missed deductions or compliance risk. Medical facilities require careful, asset-by-asset assessment to ensure equipment is correctly classified, valued and depreciated in line with Australian tax law.

For medical property owners and investors, this is not an area for assumptions. A professionally prepared tax depreciation schedule is not optional — it is essential to ensure high-value medical equipment is accurately assessed, fully compliant and audit-ready. Contact BMT Tax Depreciation on 1300 728 726 or Request a Quote online to understand how medical equipment depreciation can strengthen cash flow without compromising compliance.