Could someone help as to how depreciation and CGT interact for an IP please? Say I have an IP bought for $500,000. I manage to be assessed as having $10,000 depreciation every year for 5 five years, AND I claim that against my personal tax @ 45c. After those five years, I sell the property for $800,000. The property has had a CG of $300,000 ($800k-$500k). Since it's sold after 12months, I claim the 50% CGT rebate (or whatever the correct word is). Without depreciation my CGT would be: - $300,000 * 50% = $150,000 - add $150,000 to my personal income for that year, which would continue to be at 45c (no higher level) - so total tax payable would be: $150,000 * 0.45 = $67,500. But I claimed the depreciation each year... Lets pretend that the entire $10,000 claimed is added to the cost base. So my cost base reduces from $500,000 to $450,000 ($500k - 5 x $10k). So my CGT is calculated on a notional CG of $350,000 ($800k - $450k). So CGT payable would then be $350,000 x 50% = $175,000 * 0.45 = $78,750. Is that right? So if the properties are fully negatively geared, before depreciation, then the entire $10k generates another $4500 return each year. 10 x $4500 = $45,000 total tax returned over 10 years. Against that I have to pay an extra $11,000 CGT ($78,500 - $67,500). Ya?! If so, that's a pretty good result . Also, from Terry's Tax Tip 76 it seems that stamp duty, BA fees, selling fees would be added to the cost base.