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Get a depreciation estimate for potential property investors by bradley beer

by Bradley Beer

(B. Con. Mgt, AAIQS, MRICS), Managing Director of BMT Tax Depreciation

Before a potential buyer walks away from purchasing an investment property, make sure they are aware of the depreciation deductions that will become available once the property is income producing. That potential investment may actually be affordable for the investor if property depreciation is claimed.

Every investor does their research when searching for the perfect property investment. Property Professionals are aware that investors will usually consider the potential rental return of the property, the proximity to local services and facilities, local employment drivers and the historical growth of properties in the area.

Real Estate Agents will help to facilitate a potential investor’s queries by supplying detailed research on the location of the property, a rental appraisal and the details of probable property management fees. What is often left out of the equation is the potential deductions that the investor can claim once they own and rent the property, such as rates, interest, repairs and maintenance and property depreciation.

These figures can be provided by recommending the investor speak with their Accountant and a specialist Quantity Surveyor. Of all the deductions available, property depreciation is the most often missed. Research shows that 80% of investors fail to maximise the depreciation deductions available from their investment property. Arranging a depreciation estimate for potential buyers will allow them to crunch the numbers more accurately to work out the after tax costs of holding the property. The following example shows how getting an estimate of the depreciation deductions for an investment property will help the investor to work out the costs of holding the property. A property investor was considering purchasing a three bedroom house priced at $600,000. A Property Manager completed a rental appraisal of the property and included in their marketing information an expected rental income of $545 per week or a total income of $28,340 per annum and details of potential property management fees.

With the help of their Accountant, the investor was able to work out an estimate of the costs involved in owning the property including the property management fees, interest rates, council rates, repairs and maintenance costs. Total expenses for the property were estimated to be $39,067. The Real Estate Agent had also contacted BMT to arrange a detailed estimate of the depreciation deductions that would become available to include in their material for potential buyers looking to purchase the property for investment purposes. The estimate from BMT found that an investor would be able to claim approximately $11,200 in depreciation deductions in the first full year.

The following table provides a summary of the investor’s potential after tax position at the end of the first full financial year, depending on whether or not depreciation is claimed.

Without claiming depreciation, the property investor would experience a loss of $130 per week during the first year of owning the property. By claiming depreciation, the weekly cost is reduced to $50, saving them $80 per week or $4,144 in the first year of ownership. The BMT Calculator is available online or as a mobile app for iPhone or Android. Only a few details about a prospective property are needed in order to calculate a quick estimate. To use the calculator online, investors can visit www.bmtqs. or to download the app visit tax-depreciation-calc-app-support.

Contact BMT Australia-wide on 1300 728 726 today for a depreciation estimate for any property listed for sale or any property recently sold to an investor client.


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