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Case Study

Transforming Cashflow on a New Apartment Purchased for $675,000

By ordering a Duo Tax depreciation schedule and claiming depreciation on her brand new apartment, Martha went from being in a significant negative cash flow situation to being in a far more advantageous one.
Martha chose to live in the property before renting it out, which unfortunately impacted her depreciation deductions. However, brand-new properties generally offer significant tax deductions, so she still ended up saving $3,626.
Here's how.

The Numbers: Martha’s Investment Property

Here are some figures regarding Martha’s investment property:
Purchase Type
She purchased a brand-new apartment for $675,000 two years ago and only rented it out six months after living in it.
Rent
Her yearly rental amounted to $27,300 per year – a weekly rental of $525.
Expenses
The property’s expenses amounted to $36,333, covering her interest repayments, management fees, rates and maintenance.

While Martha wasn’t able to claim deductions for the depreciation on the property’s existing plant and equipment (Division 40 assets) due to living in the property before renting it out, she claimed significant depreciation on the property’s capital works (Division 43) deductions. This was due to her purchasing a new property.

Without Depreciation vs With Depreciation Services

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

According to her Duo Tax depreciation schedule, Martha was open to claiming $9,800 depreciation in her first year of ownership.

A brand-new apartment purchased for $675,000

Martha’s numbers without a depreciation claim

Annual Income
($525 x 52 weeks)
$27,300
Annual Expenses
$36,333
Pre-tax: Net Income
Income minus expenses: $27,300 - $36,333)
-$9,033
Total Taxation Loss
-$9,033
Tax Refund
(tax loss x 37% tax rate)
$3,342
Annual Costs of the Investment Property
[net income + tax refund: (-$9,033) + $3,342]
-$5,691
Weekly loss
-$109

Martha’s numbers with a depreciation claim of $9,800

Annual Income
($525 x 52 weeks)
$27,300
Annual Expenses
$36,333
Pre-tax: Net Income
Income minus expenses: $27,300 - $36,333)
-$9,033
Total Taxation Loss
[net income + depreciation: (-$9,033) + ($9,800)]
-$18,833
Tax Refund
(tax loss x 37% tax rate)
$6,968
Annual Costs of the Investment Property
Total taxation loss [net income + depreciation: (-$9,033) + ($6,968)]
-$2,065
Weekly loss
-$40
Difference of $70 per week or $3,626 per year

Without depreciation, Martha had to pay $109 out of her own pocket each week. However, by taking advantage of the Australian Tax Office’s tax breaks and making a depreciation claim, Martha reduced that weekly payment by $70 per week. 

This means that Duo Tax was able to save Martha a total of $3,626  in her first year of owning the investment property. 

The best part about her depreciation schedule is that it remains valid for up to 40 years. This allows  Martha to continue saving money annually, as long as she continues to carry ownership of the property.

Here’s How Much You Could Be Claiming

As you can see from Martha’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!

Organise Your Depreciation Schedule Today!

Step 1

Qualify your Property

Call us and we will ask you a few simple questions to qualify your investment property.
Call 1300 185 498
Step 2

Order a Tax Depreciation Schedule

Order over the phone or via our online form and we will begin preparing your depreciation schedule.
Order Here
Step 3

Claim Maximum Deductions

Within approx. 5-10 business days your personalised report will be delivered to you and your accountant.
View Sample Report

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