All Topics / Help Needed! / Depreciation

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  • Profile photo of Cherry ProCherry Pro
    Participant
    @cherry-pro
    Join Date: 2007
    Post Count: 22

    Can someone please tell me how depreciation works to turn a property into a positive cashflow one ? How much can one claim
    as depreciation ?

    Let me give you a scenario

    Interest costs $29000 pa
    Other property expenses $6500 pa
    ie. total costs $35500

    Rent $18500 pa
    Depreciation $17000

    Will this mean a positive / negative cash flow if income is around
    $65000 pa ?

    Thanks heaps

    Profile photo of ducksterduckster
    Participant
    @duckster
    Join Date: 2004
    Post Count: 1,674

    Depreciation comes in two forms
    Capital building Writeoff usually claimed at 2.5% of building cost on recently built properties.
    Other
    is Fixtures in a house like a new kitchen, hot water service, Vinyl floor, carpet ect , have different levels of depreciation which can be found at
    http://www.ato.gov.au/individuals/content.asp?doc=/content/66031.htm
    http://www.ato.gov.au/individuals/content.asp?doc=/content/66033.htm
    http://www.ato.gov.au/individuals/content.asp?doc=/content/31258.htm&pc=001/002/002/010/005&mnu=1009&mfp=001/002&st=&cy=1
    or through a quanty surveyor or accountant.

    Comments are of a general nature and may not be relevant to your individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.

    Profile photo of JFisherJFisher
    Member
    @jfisher
    Join Date: 2007
    Post Count: 143

    Hi Duckster
    My accountant told me that a kitchen was a capital cost and was subject to the building write off (2.5%); even an oven if it was built in was depreciated at 2.5%. but a freestanding stove, dishwasher etc all came in under the fixture/prime cost depreciation of varying amounts. Can you clarify, as I been doing my sums thinking that new kitchens would be depreciated over 40 years. I couldn’t find the kitchen listed in the ATO’s guide. Appreciate your advice.

    Julie Fisher
    Daryl Fisher Homes

    Profile photo of Cherry ProCherry Pro
    Participant
    @cherry-pro
    Join Date: 2007
    Post Count: 22

    Thank you Ducktser for pointing me in the right direction.

    I really love the ease of using this Forum

    Profile photo of depreciatordepreciator
    Member
    @depreciator
    Join Date: 2003
    Post Count: 541

    Julie, kitchens are building i.e.2.5%.
    $17,000 depreciation Cherry Pro? That must be a pretty flash property. Where did you get that figure?
    Scott

    Tax Depreciation Schedules
    Australia wide service
    1300 660033
    [email protected]
    http://www.depreciator.com.au

    Profile photo of depreciatordepreciator
    Member
    @depreciator
    Join Date: 2003
    Post Count: 541

    Cherry Pro, just thinking a bit more about this:

    Interest costs $29000 pa
    Other property expenses $6500 pa
    ie. total costs $35500

    Rent $18500 pa
    Depreciation $17000

    I think you might be a bit confused. Depreciation is just another ‘outgoing’, or cost. It’s a tax deduction you treat the same as rates, management fees etc.
    But it is a ‘non-cash deduction’. With rates, for example, you pay out money every year and then try and claim some back. With depreciation, you locked in your entitlement when you bought the property. So all you do every year is claim that depreciation.
    Give me a call if that doesn’t make sense.
    Scott

    Tax Depreciation Schedules
    Australia wide service
    1300 660033
    [email protected]
    http://www.depreciator.com.au

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