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The difference depreciation can make – a case study

Why is depreciation important? How does it assist you as an investor?

Let’s take a look at the difference depreciation can make to an investors cash flow once applied.

Mia purchased a two bedroom apartment for $528,000 one year ago. The property was rented for $470 per week with a total income of $24,440 per annum. Expenses for the property including interest, rates and management fees totalled to $37,935.

After calling BMT Tax Depreciation, Mia found that she would be able to claim $9,938 in depreciation deductions.

The below table illustrates an example of Mia’s situation both with and without a depreciation claim.

2013_TM1-2-bedr-unit-depreciation-scenario

If Mia did not claim depreciation, she would experience a loss of $164 per week for the first year of ownership. Simply by claiming depreciation Mia can reduce her loss to just $93 per week. In total BMT Tax Depreciation would save her $3,692 in just one year; this is a significant saving.

Considered a non-cash deduction, investors do not need to spend any money to be eligible to claim depreciation. The cost of obtaining a depreciation schedule which outlines deductions for the life of the property is 100% tax deductible.  The deductions claimed from depreciation can make a substantial difference to a property investor’s cash flow.

Article provided by BMT Tax Depreciation.

Bradley Beer (B. Con. Mgt, AAIQS, MRICS) is the Chief Executive Officer of BMT Tax Depreciation.
Please contact 1300 728 726 or visit www.bmtqs.com.au for an Australia wide service.