Cash in on depreciation

Written on the 13 July 2009

A LEADING property consultant has found that claiming tax deductions for depreciation could save some investment property owners up to $17,600 for the last financial year.

Napier & Blakely managing director Alistair Walker says investment property owners with earned assessable income are able to claim depreciation on residential or non-residential properties.

Walker uses the example that if someone has an income of $100,000 a year, a five-year old commercial office building with a purchase price of $1 million and a land value of $200,000, then they could receive 32 per cent more in after tax income – an increase of $17,600.

“An interesting aside to all of this is that now we are in a low interest rate regime that many properties are now ‘cash positive’ and negative gearing is no longer relevant, so these tax deductions are even more appropriate,” he says.

“Property returns are measured and published as pre tax returns with very little or no emphasis on what an after tax position might be, something that we have been trying to change, as the numbers can be quite surprising.”

Walker points out that fewer tax deductions are available for high yield properties than for those with low yields, especially residential properties. But residential properties do offer better percentages in after tax cash.

He uses the example of an investor with an income of $26,000 per annum and a $600,000 high rise strata title apartment with a land value of $75,000 – in this case, claiming tax deductions would result in a 42 per cent increase in after tax cash.

“Obviously tax deductions will vary between different property types, the age of the property and sometimes by contract clauses at purchase.

“Generally speaking, if you would like to earn more cash from your investments then you should seriously consider the available deductions and have your investments analysed.”


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