Case Study

Brand New Warehouse Built for $1,870,000

By ordering a Duo Tax depreciation schedule and claiming depreciation on his new warehouse, Steve could significantly increase his investment income and boost his cash flow position.

He ended up saving $16,830 in his first year of owning the property!

Here's how.

The Numbers: Steve’s Investment Property

Here are some figures regarding Steve’s investment property:

Purchase Type

he built a warehouse in 2017 with a high quality upstairs office area with timber floor coverings, ducted air conditioning, a kitchenette area and a bathroom,

Rent

he secured tenants immediately who currently pay $1,830 rental per week - which is $95,160 per year, and

Expenses

the warehouse expenses amounted to $86,037, covering his interest repayments, management fees, rates and maintenance.

Commercial property owners can claim depreciation deductions for the building’s structure as well as any assets they own within their property. So Steve can claim depreciation on the plant and equipment (Division 40) assets that he owns and the offices’ capital works (Division 43) deductions.

Without Depreciation vs With Depreciation Services

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

According to his Duo Tax depreciation schedule, Steve could claim $37,400 depreciation in his first year.

A brand new warehouse built for $1,870,00

Steve’s numbers without a depreciation claim

Annual Income

($420 x 52 weeks)

$95,160

Annual Expenses

$86,037

Pre-tax: Net Income

Income minus expenses: $95,160 - $86,037)

$9,123

Total Taxation Loss

$4,105

Tax Refund

(tax loss x 37% tax rate)

$0

Annual Costs of the Investment Property

[net income + tax refund: ($4,105) + $0]

$5,018

Weekly income

$96

Steve’s numbers with a depreciation claim of $16,830

Annual Income

($420 x 52 weeks)

$95,160

Annual Expenses

$86,037

Pre-tax: Net Income

Income minus expenses: $95,160 - $86,037)

$9,123

Total Taxation Loss

[net income + depreciation: ($9,123) + ($16,830)]

-$28,277

Tax Refund

(tax loss x 37% tax rate)

$12,725

Annual Costs of the Investment Property

Total taxation loss [net income + depreciation: ($9,123) + ($12,725)]

$21,848

Weekly income

$420

Difference of $324 per week/ $16,830 per year

Without depreciation, Steve was only generating $96 of weekly profit from his warehouse investment. However, by taking advantage of the Australian Tax Office’s tax breaks and making a depreciation claim, he started generating $420 each week - which is $324 more than before his depreciation claim.

This means that Duo Tax was able to save Steve a total of $16,830 in the first year of owning the warehouse.

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

Here’s How Much You Could Be Claiming

As you can see from Steve’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!