The previous owner had completed minor renovations on the property before he sold it. As a result, he is only able to claim depreciation on the renovations of the property. This means he can claim depreciation on plant and equipment (Division 40) assets that he installed (not on any assets installed by the previous owner) and can only claim capital works (Division 43) deductions on the minor renovations.
The following cost breakdown shows Sean’s cash position with and without depreciation in his first year of owning the property.
According to his Duo Tax depreciation schedule, Sean could claim $5,900 depreciation in his first year of renting the property out.
Sean’s numbers without a depreciation claim
Sean’s numbers with a depreciation claim of $5,900
Without depreciation, Sean would have to pay $133 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 reduced that payment to $91 per week.
This means that Duo Tax was able to save Sean a total of $2,183 in his first year claiming depreciation deductions.
The great thing about his depreciation schedule is that it’s valid for up to 40 years! So, Sean can continue saving money each year, as long as he continues to own the property.
Our Duo Tax Rental Property Depreciation Calculator is free, so make sure to check it out!