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Depreciation: the key to increasing the return on an investment property

Mar 23, 2016 11:09:39 AM

_SCG9984.jpgOwners of properties which generate an income are eligible for significant taxation benefits.

The Chief Executive Officer of BMT Tax Depreciation Bradley Beer says “Research shows that 80 per cent of property investors are failing to take full advantage of property depreciation and are missing out on thousands of dollars in their pockets.”

Depreciation is often missed because it is a non-cash deduction. The investor does not need to spend money to claim it. As a building gets older, items wear out - they depreciate. The Australian Taxation Office (ATO) allows property owners to claim this depreciation as a deduction.

Depreciation: An investor profile

An investor has purchased a property for $420,000 and is receiving $490 per week in rent for a total income of $25,480 per annum. The estimated expenses for the property include interest, rates and management fees, which total $32,000 per annum. The following scenario shows the investor’s cash flow with and without depreciation. A typical $420,000 unit will depreciate by around $11,500 in the first full financial year.

2013_TE1_With_or_without_depreciation_scenario.jpgIn this example the investor uses property depreciation to go from a negative cash flow scenario, paying out $79 per week, to a positive cash flow scenario, earning $3 per week on the property. By claiming depreciation this investor will save $4,255 for the year.

If you want more information about depreciation deducations that may be available for your investment property click here.

Article provided by BMT Tax Depreciation. 

Bradley Beer (B. Con. Mgt, AAIQS, MRICS) is the Chief Executive Officer of BMT Tax Depreciation. 


Topics: Investment Property