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.

Without depreciation, Elouise loses $128 per week. With depreciation, she’s ahead $9 per week. That’s a $7,097 difference in annual tax refund alone.

* 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.

Go here for more or read BMT’s White Paper

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