Case Study

A New House Purchased for $680,000

By ordering a Duo Tax depreciation schedule and claiming depreciation on his brand new property, Luke went from being in a negative cash flow position to generating some positive cash flow from his investment property.
Brand new properties generally offer significant tax deductions, so he ended up saving $6,031 in his first year of owning the property!
Here's how.
A New House Purchased for $680,000

The Numbers: Luke’s Investment Property

Here are some figures regarding Luke’s investment property:

Type of Purchase

he purchased a brand new house for $680,000 one year ago and rented it out immediately.

Rent

his yearly rental amounted to $29,120 per year - which is a weekly rental of $560.

Expenses

the property’s expenses amounted to $36,576, covering his interest repayments, management fees, rates and maintenance.

Because Luke invested in a brand new property, he can claim deductions for the depreciation on the property’s plant and equipment (Division 40 assets) and the property’s capital works (Division 43) deductions.

Without Depreciation vs With Depreciation Services

The following cost breakdown shows Luke’s cash position with and without depreciation in his first year of owning the property. 

According to his Duo Tax depreciation schedule, Luke could claim $16,300 depreciation in his first year. 

A Brand New House Purchased for $680,000

Luke’s numbers without a depreciation claim

Annual Rental Income
$560 x 52 weeks
$29,120
Annual Property Expenses
$36,576
Net Income (Pre-tax)
Income minus expenses: $29,120 - $36,576
-$7,456
Total Taxation Loss With No Depreciation
-$7,456
Tax Refund
Tax loss x tax rate: -$7,456 x 37%
$2,759
Annual Costs of the Investment Property
Net income + tax refund: (-$7,456) + $2,759
-$4,697
Weekly loss
-$90

Luke’s numbers with a depreciation claim of $6,031

Annual Rental Income
$560 x 52 weeks
$29,120
Annual Property Expenses
$36,576
Net Income (Pre-tax)
Income minus expenses: $29,120 - $36,576
-$7,456
Total Taxation Loss With Depreciation
Net income + depreciation: (-$7,456) + ($6,031)
-$23,756
Tax Refund
Total Taxation Loss x Tax Rate: -$23,756 x 37%
$8,790
Annual Income from the Investment Property
Net Income + Tax refund: (-$7,456) + ($8,790)
$1,334
Weekly income
$26
Difference of $116 per week / $6,031 per year

Without depreciation, Luke had to pay $90 out of his own pocket each week. However, by taking advantage of the Australian Tax Office’s tax breaks and making a depreciation claim, Luke went from covering the loss to actually generating $26 each week. 

This means that Duo Tax was able to save Luke a total of $6,031 in his first year of owning the investment property. 

The great thing about his depreciation schedule is that it’s valid for up to 40 years! So, Luke can continue saving money each year, as long as he continues to own the property.

Here’s How Much You Could Be Claiming

As you can see from Luke’s scenario, tax depreciation schedules can make a significant difference in an investor’s cash flow each year.

However, if you’re still feeling unsure about committing to ordering a depreciation schedule, we have designed a tax depreciation calculator to help you estimate what you could potentially claim on tax depreciation.

This is an accounting tool designed to help estimate and calculate the declining value of capital works and plant and equipment assets and relies on accurate figures to present accurate estimations.
Rental Property Depreciation Calculator

Obtain your tax depreciation schedule in 3 easy steps.

Step 1
Qualify your Property
Call us and we will ask you a few simple questions to qualify your investment property.
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Step 2
Order a Report
Order over the phone or via our online form and we will begin preparing your report.
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Step 3
Claim Maximum Deductions
Within approx. 10-15 business days your report will be delivered to you and your accountant.
View Sample Report

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