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    Case Study

    Turning TJ’s Recent Purchase into a Positive Cash Flow Investment - Despite it Being Over 42 Years Old

    TJ took a risk last year and purchased an apartment (that was built before 1987) as his first investment. The previous owner had not completed any renovations on the property (although they did give it a fresh coat of paint before selling it), so he decided to invest some more money into his purchase and upgraded the kitchen, bedrooms and bathroom.
    Six months later, he was able to secure tenants and start generating some rental income. Fortunately, TJ was pretty clued up on the benefits of ordering a tax depreciation schedule for his investment property, so he got in touch with the Duo Tax team immediately after completing the renovations. Without the depreciation schedule, TJ would’ve been in a negative cash flow position. But our team was able to save him $666 and get him pocketing some profit.
    Here's how.
    An apartment living area

    The Numbers: TJ’s Investment Property

    Here are some figures regarding TJ’s investment property:

    Type of Purchase

    he purchased an apartment originally built in 1980 for $395,000 in 2021 and rented it out 6 months later.

    Rent

    his yearly rental amounted to $17,160 per year - which is a weekly rental of $330.

    Expenses

    the property’s expenses amounted to $17,849, covering his interest repayments, management fees, rates, and maintenance.

    Unfortunately, because TJ lived in the property for a few months before he rented it out, he was not able to claim any tax deductions for the depreciation on the property’s  plant and equipment (Division 40) assets . But he can claim capital works (Division 43) deductions on the minor renovations he completed and the repainting that the previous owner did. 

    Without Depreciation vs With Depreciation Services

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

    According to his Duo Tax depreciation schedule, TJ could claim $1,800 depreciation in his first year of renting the property out. 

    An apartment built in 1980 purchased for $395,000

    TJ’s numbers without a depreciation claim

    Annual Rental Income
    $330 x 52 weeks
    $17,160
    Annual Property Expenses
    $17,849
    Net Income (Pre-tax)
    Income minus expenses: $17,160 - $17,849
    -$689
    Total Taxation Loss With No Depreciation
    -$689
    Tax Refund
    Tax loss x tax rate: -$689 x 37%
    $255
    Annual Costs of the Investment Property
    Net income + tax refund: (-$689) + $255
    -$434
    Weekly loss
    -$8

    TJ’s numbers with a depreciation claim of $1,800

    Annual Rental Income
    $330 x 52 weeks
    $17,160
    Annual Property Expenses
    $17,849
    Net Income (Pre-tax)
    Income minus expenses: $17,160 - $17,849
    -$689
    Total Taxation Loss With Depreciation
    Net income + depreciation: (-$689) + ($1,800)
    -$2,489
    Tax Refund
    Total Taxation Loss x Tax Rate: -$2,489 x 37%
    $921
    Annual Income from the Investment Property
    Net Income + Tax refund: (-$689) + ($921)
    $232
    Weekly income
    $4
    Difference of $12 per week / $624 per year

    Without depreciation, TJ would have to pay $8 out of his own pocket each week. However, by taking advantage of the Australian Tax Office’s tax breaks and making a depreciation claim, he started generating a small cash flow – $4 might not seem like much, but that’s $208 he is banking over the year as opposed to spending $416. 

    This means that Duo Tax was able to save TJ a total of $624 in his first year of claiming depreciation deductions. 

    The great thing about his depreciation schedule is that it’s valid for up to 40 years! So, TJ 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 TJ’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.
    1300 185 498
    Step 2
    Order a Report
    Order over the phone or via our online form and we will begin preparing your report.
    Order Now
    Step 3
    Claim Maximum Deductions
    Within approx. 5 business days your report will be delivered to you and your accountant.
    View Sample Report

    How can we help?

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