Case Study

A 10-Year-Old House Purchased for $646,000

By ordering a Duo Tax depreciation schedule and claiming depreciation on her new property, Sarah went from being in a significant negative cash flow position to a manageable negative cash flow position.

She saved $2,331 in her first year of owning the property!

Here's how.

The Numbers: Sarah’s Investment Property

Here are some figures regarding Sarah’s investment property:

Purchase Type

she purchased a 10-year-old house for $646,000 one year ago and rented it out immediately,

Rent

her yearly rental amounted to $24,440 per year - which is a weekly rental of $470,

Expenses

the property’s expenses amounted to $35,409, covering her interest repayments, management fees, rates and maintenance.

While Sarah wasn’t able to claim deductions for the depreciation on the property’s existing plant and equipment (Division 40 assets), she was able to claim depreciation on the property’s capital works (Division 43) deductions.

Without Depreciation vs With Depreciation Services

According to her Duo Tax depreciation schedule, Sarah could claim $6,300 depreciation in her first year.

A ten-year-old house purchased for $646,00

Sarah’s numbers without a depreciation claim

Annual Income

($470 x 52 weeks)

$24,440

Annual Expenses

$35,409

Pre-tax: Net Income

Income minus expenses: $24,440 - $35,409)

-$10,969

Total taxation loss

-$10,969

Tax Refund

(tax loss x 37% tax rate)

$4,059

Annual costs of the investment property

[net income + tax refund: (-$10,969) + $4,059]

-$6,910

Weekly loss

-$133

Sarah’s numbers with a depreciation claim of $6,300

Annual Income

($470 x 52 weeks)

$24,440

Annual Expenses

$35,409

Pre-tax: Net Income

Income minus expenses: $24,440 - $35,409)

-$10,969

Total taxation loss

[net income + depreciation: (-$10,969) + ($6,300)]

-$17,269

Tax Refund

(tax loss x 37% tax rate)

$6,390

Annual costs of the investment property

Total taxation loss [net income + depreciation: (-$10,969) + ($6,390)]

-$4,579

Weekly loss

-$88

Difference of $45 per week/ $2,331 per year

Without depreciation, Sarah had to pay $133 out of her own pocket each week. However, by taking advantage of the Australian Tax Office’s tax breaks and making a depreciation claim, Sarah reduced that weekly payment by $45 per week.

This means that Duo Tax was able to save Sarah a total of $2,331 in her first year of owning the investment property.

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

Here’s How Much You Could Be Claiming

As you can see from Sarah’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.

Our Duo Tax Rental Property Depreciation Calculator is free, so make sure to check it out!