I am looking at the returns on potential investments so doing some numbers before I move forward on them . Here goes
Purchase Price incl stamp duty etc 235k sitting 30k in an offset account interest say 7% = 14350
Other expenses Rates 1500, Insurance 800, Property management 1315, extra 400 =18365Rent 310 x 50 = 15500
Difference 2865 x tax rate 30% is 859.50 Is this money owing by me or is it tax back ???????
Now where is depreciation coming into this equation say it is 3500 does this amount get taken from the 859.50 and this a refund
Sounds complicated please help me to understandThanks
Dear lulu1,
Depreciation is classified as a non-cash tax deduction and covers all depreciable assets within an investment property along with capital works (should the property qualify for building write-off). The amount mentioned of $3,500 will help reduce your overall taxable income. If your current marginal tax rate is 30%, you'll be entitled to a refund of $1,050 (based on the depreciation alone). Your total refund based on the scenario above will be (your initial loss $2,865 + depreciation deduction of $3,500) x marginal tax rate of 30% = $1,909.50 cash refund
To help determine the approximate amount of depreciation on potential purchases please feel free to use BMT's free tax depreciation calculator – http://www.bmtqs.com.au/TaxDepreciationCalculator.aspx?source=menu
I hope this helps.
Thank you for explaining I now understand I just could not get my head around it . Working out the financials as to whether a property is a good one or not is very important to me.
Thanks
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