Case Study

A New Granny Flat Built By Owner for $130,000

By ordering a Duo Tax depreciation schedule and claiming depreciation on her newly built granny flat, Charlotte went from generating under $100 weekly income to generating over $100 weekly income.

Newly built properties, including granny flats, generally offer significant tax deductions, so she ended up saving $2,701 in her first year of owning the granny flat.

Here's how.

The Numbers: Charlotte’s Granny Flat Property

Here are some figures regarding Charlotte’s investment property:

Purchase Type

she builds a granny flat for $130,000 one year ago and rented it out immediately,

Rent

her yearly rental amounted to $19,400 per year - which is a weekly rental of $370,

Expenses

the property’s expenses amounted to $12,323, covering her interest repayments, management fees, rates and maintenance.

Because Charlotte built a brand new granny flat, she can claim deductions for the depreciation on the property’s plant and equipment (Division 40 assets) and the property’s capital works (Division 43) deductions.

Without Depreciation vs With Depreciation Services

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

According to her Duo Tax depreciation schedule, Charlotte could claim $7,300 in depreciation in her first year.

Newly Built Granny Flat for $130,000

Charlotte’s numbers without a depreciation claim

Annual Income

(370 x 52 weeks)

$19,400

Annual Expenses

$12,323

Pre-tax: Net Income

Income minus expenses: $19,400 - $12,323)

$6,917

Total Taxation Loss

$2,559

Tax Refund

(tax loss x 37% tax rate)

$0

Annual Costs of the Investment Property

[net income + tax refund: ($2,559) + $0]

$4,358

Weekly income

$84

Charlotte’s numbers with a depreciation claim of $3,151

Annual Income

(370 x 52 weeks)

$19,400

Annual Expenses

$12,323

Pre-tax: Net Income

Income minus expenses: $19,400 - $12,323)

$6,917

Total Taxation Loss

[net income + depreciation: ($6,917) + ($3,151)]

-$383

Tax Refund

(tax loss x 37% tax rate)

$142

Annual Costs of the Investment Property

Total taxation loss [net income + depreciation: ($6,917) + ($142)]

$7,509

Weekly income

$136

Difference of $52 per week/ $3,151 per year

Without depreciation, Charlotte was only generating $84 of profit from her newly built granny flat. However, by taking advantage of the Australian Tax Office’s tax breaks and making a depreciation claim, she started generating $136 each week - which is $52 more than before her depreciation claim.

This means that Duo Tax saved Charlotte a total of $3,151 in her first year after building her granny flat.

The great thing about her depreciation schedule is that it’s valid for up to 40 years! So, Charlotte 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 Charlotte’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!