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With interest rates at a 12 year high, depreciation can take the pressure off property investors
During the last few years many Australians have had to spread their dollar further with higher petrol prices, interest rates and the cost of living impacting their finances.
In the current economic climate, it is easy to see why investment property owners have cause for concern. Issues such as low housing affordability, increasing but still low rental yields, increased land tax and increases in mortgage repossessions can all make successful investing appear difficult.
However, as a property investor, it is possible to effectively manage your finances and be profitable.
Ride the wave of wealth
There is a mechanism available in the Australian taxation system that enables property investors to claim a deduction related to the wear and tear on the structure of an investment property and the depreciation of the plant and equipment items contained within it. Ensuring that these deductions are maximised generally results in more cash flow for the investor. By maximising tax depreciation, the investment property becomes more tax effective.
The following examples show the difference that depreciation can make to an investor’s weekly cash flow.
Note: Pre-tax cash flow = income - expenses
While interest rates remain high, it is important for investors to make their property work for them as effectively as possible. In some cases, even obtaining between $50 and $100 extra a week through depreciation deductions can take the pressure off many investors.
The above examples highlight the importance of engaging the services of a qualified and reputable Quantity Surveyor to assess a depreciation claim and obtain the maximum depreciation deductions available from the investor’s property. In today’s economic climate, depreciation could mean the difference between sink or swim.
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