Case study:
Commercial office building purchased for $1.1 million

The below table shows how the company’s holding costs changed, without depreciation on the left and with depreciation maximised on the right.

Commercial office building purchased for $1,100,000
Scenario without depreciation claim
Annual income ($1800 x 52 weeks) $93,600
Annual expenses $124,000
Pre-tax cash flow (expenses less income) -$30,400
Total taxation loss -$30,400
Tax refund (tax loss x tax rate of 30%) $9,120
Annual costs of the investment property (pre-tax cash flow + tax refund) -$21,280
Weekly cost of the investment property -$409
Scenario with depreciation claim of $40,000
Annual income ($1800 x 52 weeks) $93,600
Annual expenses $124,000
Pre-tax cash flow (expenses less income) -$30,400
Total taxation loss (pre-tax cash flow + depreciation) -$70,400
Tax refund (tax loss x tax rate of 30%) $21,120
Annual cash flow of the investment property (pre-tax cash flow + tax refund) -$9,280
Weekly cash flow of the investment property -$178
Difference of $231 per week

This example illustrates the benefits of depreciation for commercial property owners. Damien’s company has improved the cash flow of this property by $231 per week by simply claiming property depreciation.


Assumptions and disclaimer

Case studies and figures are based upon tax depreciation schedules completed by BMT Tax Depreciation and do not represent any particular person or investment property scenario. The information provided is a general guide and does not constitute financial, legal or taxation advice. All figures are supplied as examples and may not represent your personal circumstances.

You acknowledge and agree you must undertake your own analysis and obtain independent legal, financial and taxation advice before using, relying or acting on any information supplied on this website.

Neither BMT Tax Depreciation, nor its directors, shareholders or advisors make any representation or warranty as to the accuracy or completeness of information found in these typical examples. Nor will they have any liability to you or any other party for any representations (expressed or implied) contained in, or any omissions from, that information.

The tax depreciation deductions in this case study have been calculated based on the diminishing value method of depreciation and are based upon a first full year of ownership. Marginal tax rates relevant to 2014 – 2015 financial year have been assumed.

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As you can see, property depreciation can make a significant difference to a property investor’s cash flow each financial year.

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