Join Australia's most dynamic and respected property investment community

Affect of depreciation on CGT payable

Discussion in 'Accounting & Tax' started by D3xx, 3rd Mar, 2016.

  1. D3xx

    D3xx Member

    Joined:
    3rd Mar, 2016
    Posts:
    17
    Location:
    Perth
    I'm not clear on how the depreciation claimed against an IP over time affects the CGT calculated upon sale. Can someone direct me to an explanation of how depreciation impacts the value calculation?
     
  2. Rob G

    Rob G Well-Known Member

    Joined:
    16th Oct, 2015
    Posts:
    167
    Location:
    Melbourne
    Add up all the capital works (building depreciation) deductions claimed over time. Subtract from your IP cost base.

    Make sure not to include depraciating assets such as hot water system, carpets etc.

    Visit a website of ine of the QS members on this forum for a distinction between capital works and depreciating assets.
     
  3. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,374
    Location:
    Sydney
    In the absence of all other changes, depreciation AND capital allowance deductions reduce your cost base. There is more complexity than this but that's the basics.

    I then get asked why bother ? Well the increased CGT should be eligible for a 50% discount and the inflated deductions bring forward cashflows at marginal tax rates. So generally speaking you should be at least 50% better off than not claiming QS deductions