Property Depreciation and
Construction Cost Consultants
Quantity Surveyors - Cost Planning and Tax Depreciation
BMT & Assoc Provide Depreciation Schedules

Depreciation: an investor profile

As explained on the front page, the tax depreciation benefit available to every property investor will vary. The following example has been provided as an approximate guide, using the diminishing value method of depreciation.

Property:
  • A two bedroom unit purchased for $400,000
Income:
  • Rented for $385 per week
  • Total income of approximately $20,000 per year
Expenses:
  • Interest only loan (7%) $28,000 per year
  • Rates and management expenses $4,000 per year
  • Total expenses of $32,000 per year

Scenario 1 – No depreciation claim:

Pre tax cash flow
  • Taxation loss $12,000 = $230 per week
Post tax cash flow (top tax rate of 45%)
  • Tax refund $5,400

Net cash outlay $6,600 = $126 per week

Scenario 2 – With depreciation claim:

Pre tax cash flow
  • Tax depreciation $12,000
  • Cash flow position -$12,000
  • Total deduction $24,000
Post tax cash flow (top tax rate of 45%)
  • Tax refund $10,800

Net cash outlay $1,200 = $23 per week

This demonstrates the after tax effect of applying property depreciation. The property investor in this situation has a bottom line benefit of $5,400 per annum. This benefit is the difference between the $6,600 cost before depreciation is applied, and the $1,200 cost once depreciation is applied.

This profile emphasises the benefit of depreciation. The property investor has made this saving from the same property that had moments ago cost $6,600 for the same period.

Construction Type

Level of Finish


Residential

Low

Medium

High

3br brick veneer project home, level block, shelf design
$929
$1,149
$1,439
Architecturally designed executive residence
$1,954
$3,006
$4,670
3br, 2 level brick veneer townhouse, including allowance for common property
$1,161
$1,349
$1,935
3 level walk-up unit complex, concrete structure ground floor parking
$1,310
$1,576
$2,046
Multi-level apartment building,including lift and basement car parking
$1,493
$1,880
$2,820

Commercial
1-2 level open plan offices, including A/C, excluding fitout
$1,073
$1,384
$2,072
1-4 level open plan offices, including A/C & lifts, excluding fitout
$1,196
$1,406
$2,133
4-8 level open plan offices, including A/C & lifts, excluding fitout
$1,440
$1,750
$2,206
8 levels and over, including A/C & lifts, excluding fitout
$1,720
$1,980
$2,580

Industrial

High Bay Warehouse, standard config, concrete floor, metal clad (size to 3500sqm)
$720
$780
$900
High Bay Warehouse, standard config, concrete floor, metal clad (size > 3500sqm)
$705
$760
$855
High Bay Warehouse, standard config, concrete floor, pre-cast concrete wall clad (size to 3500sqm)
$790
$875
$980
High Bay Warehouse, standard config, concrete floor, pre-cast concrete wall clad (size > 3500sqm)
$750
$850
$950

Retail

Suburban shopping mall area including A/C
$1,224
$1,503
$1,772
Bulky goods centre, concrete tiltup construction, including A/C, excluding fitout
$971
$1,207
$1,343
Supermarket, including A/C, excluding fitout\
$1,150
$1,250
$1,350
Specialty shops, including A/C, excluding fitout
$820
$885
$981

Hotels/Motels

Single level boutique motel, including A/C guest facilities
$1,695
$2,126
$2,778
Single level tavern/hotel, including A/C, excluding loose item fitout
$1,485
$1,865
$2,035
Licensed club, including A/C, bar, lounge, rec facilities
$1,422
$1,825
$2,450
Multi-level, 3 star hotel including A/C, restaurant, bar, common facilities
$2,200
$2,845
$3,250

The Calculation of Construction Costs

The above costs are calculated based on a Gross Floor Area (GFA) rate. Typically GFA can be defined as the sum of the fully enclosed covered floor area and the unenclosed covered floor area of a building at all floor levels, measured in a squaremetre rate. GFA consists of two elements:

  • Fully Enclosed Covered Area (FECA)
  • Unenclosed Covered Area (UCA)
FECA:
Includes items such as:
  • Basements
  • Attics
  • Garages
  • Penthouses
  • Lift shafts
  • Staircases
  • Columns and piers.
UCA:
Includes items such as:
  • Roofed balconies
  • Open verandahs
  • Porches and porticos
  • Attached covered walkways
  • Usable space under buildings.

Costs provided are an average price for typical buildings as at the date of publication, allowing for preliminaries, builders profit and overheads. Costs can provide nomore than a rough guide to the probable cost of building, as costs can vary significantly based on site conditions, level of fitout and design.

Regional Variations

Cairns 115 - 130%
Brisbane 105 - 115%
Sydney 100%
Canberra 96 - 104%
Melbourne 98 - 108%
Hobart 87 - 97%
Adelaide 98 - 110%
Perth 100 - 120%