While Vivian purchased a brand-new townhouse, she can’t claim deductions for the depreciation on the property’s plant and equipment (Division 40 assets) because she lived in the property for the first six months. According to the ATO, if the property was purchased after 2017, owners can’t claim depreciation for existing plant and equipment assets.
However, Vivian can claim deductions for the property’s capital works (Division 43) deductions.
The following cost breakdown shows Vivian’s cash position with and without depreciation in her second year of owning the property.
According to her Duo Tax depreciation schedule, Vivian could claim $9,000 depreciation in her first year.
Vivian’s numbers without a depreciation claim
Vivian’s numbers with a depreciation claim of $9,000
Without depreciation, Vivian would’ve had to have paid $127 out of her own pocket each week. However, by taking advantage of the Australian Tax Office’s tax breaks and making a depreciation claim, Vivian reduced that amount to only $62.
This means that Duo Tax was able to save Vivian a total of $3,330 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, Vivian can continue saving money each year, as long as she continues to own the property.
Our Duo Tax Rental Property Depreciation Calculator is free, so make sure to check it out!