This article explores how Eloise goes from being $128 per week in the red, to being ahead by $9 per week with the use of depreciation. That’s a $7,097 difference in annual tax refund alone.

In the process of making that exciting investment property purchase, often “details” (like the tax implications of depreciation) can get lost in the popping of champagne corks. Be aware that neglecting this could be at your peril! A small investment in expert specialist advice upfront could save you a lot of money in the long run

Take the case of Elouise who recently bought a brand new two-bedroom apartment in South Yarra for $1 million and rented it out at $800 per week ($41,600 p.a.). Interest, rates, body corporate fees, property management fees and repairs and maintenance cost her $53,661 a year.

Seeking to maximise her tax options, Elouise engaged BMT Tax Depreciation who advised her she could claim $15,770 in depreciation for the first full year. The table below outlines her cash flow, with and without depreciation.

* Under new legislation outlined in the Treasury Laws Amendment (Housing Tax Integrity) Bill 2017 passed by Parliament on 15th November 2017, investors who exchange contracts on a second-hand residential property after 7:30pm on 9th May 2017 will no longer be able to claim depreciation on previously used plant and equipment assets.

Investors can claim deductions on plant and equipment assets they purchase and directly incur the expense for. Investors who purchased prior to this date and those who purchase a brand-new property will still be able to claim depreciation as they were previously.

* This case study was provided by BMT Tax Depreciation Quantity Surveyors Australia.

Go here for more or read BMT’s White Paper


Disclaimer: The contents of this document (contents) have been prepared and are provided by Kay & Burton (which means and includes Kay & Burton Pty Ltd, its associated entities and its officers, servants, contractors, employees and agents) in good faith. Some of the contents have been provided to Kay & Burton by others. Kay & Burton does not represent or warrant the accuracy of the contents. The contents are provided solely for information purposes and do not constitute any recommendation, advice or direction by Kay & Burton for anyone to use any of the contents to make any decision about anything and in particular, about making any investment or participating in or acquiring, disposing, selling or purchasing anything or entering into any agreement, arrangement or dealing (whether legally binding or not). Kay & Burton recommends that any such decision should only be made following the receipt of advice from an appropriately qualified advisor

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