Depreciation - claiming & paying back

Discussion in 'Accounting & Tax' started by Keentolearn77, 24th Oct, 2017.

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  1. Keentolearn77

    Keentolearn77 Well-Known Member

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    What would the general rule be to expect

    Build new IP - say x 2 townhouses - Construction costs $750k, then claim on depreciation, how much would you be likely claiming back each year.... in the 1st 5-10 years..... ie: would it be 30k? (would you get back that $30k at tax time or just half of it back in your pocket....)

    And say in 20 years time - whatever - you sell the IP.... Do all those depreciation claims.... - say it adds up to 500k - is that 500k taken from you CG - if you made a capital gain of a 900k - does that 500k get deducted - meaning you only get 400k CG profit in your pocket.....

    Cheers
     
  2. qak

    qak Well-Known Member

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    Assuming you are renting them out.
    Building allowance 2.5% p.a. = $18,750 p.a.
    After 10 years = $187,500.
    So your reduced cost base is $750K-$187,500=$562,500.
    Your gain is increased by $187,500 (not reduced). But you only pay CGT on half of that.
    nb - assumes no tax changes
     
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  3. Keentolearn77

    Keentolearn77 Well-Known Member

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    Much thanks - my lack of accounting brain half follows...
    So ie: each yr i’d get back an extra $18750 in my tax return....
    And.... cgt??....
    Ie if sold for say 1.4mill in 10 yrs is what your saying - in laymans 1.4 - 562,500 = $837,500 CG..... then i’d understand 50% discount = pay tax on $418,750 at my tax rate......
    So in short - ive received $187500 in tax return reimbursements over 10 yrs, which is factored out when coming time to sell down the track
     
  4. qak

    qak Well-Known Member

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    No - this is a tax deduction. The actual tax depends on the tax rate you are on.
     
    Terry_w likes this.