Case study:
A motel purchased for $2,000,000 one year ago

The tables below outline Byron’s scenario before and after he made the depreciation claim:

A hotel purchased for $2,000,000 one year ago
Scenario without depreciation claim
Annual income ($4,737 x 52 weeks) $246,324
Annual expenses $301,650
Pre-tax cash flow (expenses less income) -$55,326
Total taxation loss -$55,326
Tax refund (tax loss x tax rate of 47%) $26,003
Annual costs of the investment property (pre-tax cash flow + tax refund) -$29,323
Weekly cost of the investment property -$564
Scenario with depreciation claim of $97,895
Annual income ($4,737 x 52 weeks) $246,324
Annual expenses $301,650
Pre-tax cash flow (expenses less income) -$55,326
Total taxation loss (pre-tax cash flow + depreciation) -$153,221
Tax refund (tax loss x tax rate of 47%) $72,014
Annual cash flow of the investment property (pre-tax cash flow + tax refund) $16,688
Weekly cash flow of the investment property $321
Difference of $885 per week

By claiming tax depreciation Byron has improved the cash flow on his property by $885 per week going from a negative cash flow situation where he was paying $564 per week to earning $321 per week from his property.


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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Recently renovated pub purchased for $1,100,000

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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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