It never ceases to amaze me how many property investors don’t obtain a depreciation schedule from a quantity surveyor, before trying to get their tax returns completed.
Clients will come in expecting a big tax return to help offset / fund the negative cash flow they have suffered month after month, only to be disappointed, until in many cases we recommend a Quantity Surveyor Report (depreciation schedule).
Once depreciation has been claimed many discover their negative cash flow will actually turn into a positive cash flow. I have on many occasions had the pleasure to show clients that what they thought was a lemon (costing them money) was in fact a positive cash flow property once depreciation was claimed.
Depreciation on an investment property as defined by the ATO is – a non-cash deduction, which may be the key to creating higher paper losses, which then convert to positive cash flows after tax.
The newer the property the higher the depreciation. New properties not only provide higher depreciation, but also provide higher rents, better tenants, and generally much less maintenance and stress.
| Std 4 bedroom, double garage house | Withoutdepreciation | Withdepreciation |
| Purchase price | $500,000 | $500,000 |
| Rental income (p.a. @ 5%) | $25,000 | $25,000 |
| Less mortgage (p.a. @ 5%) | $22,500 | $22,500 |
| Less property expenses (p.a. @1.5%) | $7,500 | $7,500 |
| Less depreciation 1st year | – | $13,800* |
| Tax loss/your tax deduction | -$5,000 | -$18,800 |
| Annual refund based on 34.5% tax rate | $1,725 | $6,486 |
| After Tax Cash flow | -$3,275 | $1,486 |
| Weekly refund if applying for | $33 | $124 |
BMT Tax Depreciation Calculator / Umbrella Accountants
http://www.bmtqs.com.au/tax-depreciation-calculator?company=umbrella-accountants#result-section-bookmark
Standard house construction – Medium Quality of Finish, 4 bedroom double garage, constructed and purchased in 2014, Brisbane Suburban, 200 m2, estimated cost of construction as at 1st July 2014 $248,519
Assume 90% lend of Purchase Price, Investor’s Taxable income of $75,000 pre investment Property,
Principal Place of Residence Exemption Loss if Sold While Overseas Summary of how the Principal Place of Residence (PPR) Exemption is impacted by moving overseas. When Australian homeowners move overseas and become non-residents for tax purposes, selling their...
Having an investment property prior or posted to it being a principal place of residence has tricky CGT Calculations. Capital Gains Tax (CGT) is an essential consideration for property owners when selling a property used for different purposes over time. This blog...
Picture of a vacant block of land to illustrate it may be subject to land tax What is Land Tax? Land tax is a state and territory-imposed tax on the unimproved value of taxable land owned by individuals, companies, and trusts. It is calculated annually based on a...
What are the tax and investment considerations for a Granny Flat above versus a Tiny Home below? Income Tax Return Reporting - Income Streaming Tiny Homes Tiny home ownership does not have to follow the ownership interest of the underlying property ownership. For...
Secondary Dwelling From December 2023 the Victorian Government has passed planning changes to make it easier to build Granny Flats - or "small secondary dwellings", on existing homes. The Victorian Premier Jacinta Allan revealed that planning permits will no longer be...
The ATO is particularly targeting property investors that are not using the help of a specialist property tax accountant like Umbrella Property Accountant, due to the high error rate being discovered from ATO Audits. The ATO Audits into self-preparers have uncovered...
Gold Coast - Example of the Housing Rental Competing Forces Many Apartments are sitting empty most of the year, including an entire beachfront tower. Gold Coast mayor Tom Tate cited an entire high-rise sitting empty in the triple tower Jewel development at Surfers...
Victoria was the most locked-down state in Australia, if not the world during Covid, resulting in the Victorian Government accruing over $30 Billion in debt to keep the doors closed. Victorian Statement Government wants to raise $8.6 Billion over the next 4 years by...
Joint Venture tax understanding for property developers in Australia Joint Venture Agreement What is a (JV) for Property Development A joint venture (JV) is a cooperative agreement between two or more parties in which all parties contribute their resources (such as...
A federal Labor government would deliver a $329-million help-to-buy scheme, providing 10,000 Australians with a government guarantee of up to 40 per cent on new homes or 30 per cent on existing homes with a two per cent deposit.
