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Property Tax Depreciation BenefitsDepreciation provides property investors with legitimate tax deductions. Claiming depreciation can vastly improve the cash flow situation of a property investment. Quantity Surveyors are recognised by the Australian Taxation Office to complete tax depreciation reports for investors. The tax depreciation benefit available to every property investor will vary. The following example has been provided as an approximate guide, using the diminishing value method of depreciation. Property: A two bedroom unit purchased for $400,000 Income: Rented for $385 per week Total income of approximately $20,000 per year Expenses: Interest only mortgage $32,000 per year Rates and management expenses $4,000 per year Total expenses of $36,000 per year Scenario 1 - No depreciation claim:Pre tax cash flow Taxation loss $16,000 = $308 per week Post tax cash flow (tax rate of 38%) Tax refund $6,080 Net cash outlay $9,920 = $190 per week Scenario 2 - With depreciation claim:Pre tax cash flow Taxation depreciation $12,000 Cash flow position -$16,000 Total deduction $28,000 Post tax cash flow (tax rate of 38%) Tax refund $10,640 Net cash outlay $5,360 = $103 per week For this investor, obtaining a Tax Depreciation report means an extra $87 per week. Mortgage House would like to thank BMT Tax Depreciation Pty Ltd for this article. If you are interested in purchasing an investment property, Mortgage House can assist you with the following:
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