Depreciation schedule claims

Hi all, basic question here.

I have just bought my first IP and have just had a depreciation schedule/report done. I just want to know how to work out how much this will benefit me each year. The report says that the division 43 building write off allowance is $6143 for the first 10 years. Does this simply mean my taxable income reduces by this amount, and therefore because I've paid tax on this amount I will get it back? Ie pay 30% (or whatever it is) tax on $6143 and therefore I will get $1843 back at tax time? Or am I understanding this wrong?

 

roughly - but don't forget you will have rental income too.

 

Yep, you deduct the depreciation claim from your taxable income. You treat other property related tax deductions the same way: interest payments, council rates, water rates, property management fees etc.
If it is a recent purchase and not brand new, the depreciation on the Assets: oven, carpet, blinds etc, will be deferred. You use that deferred depreciation when you sell the property to reduce your CGT. The Depreciation Schedule should make that clear.
Scott

 

Great thanks for your replies. That's the way I thought it worked, and I know I'll have rental income but that doesn't cover the mortgage - I am negatively geared.

 

As a rough rule of thumb the annual cashflow value of a QS report is between 25-40% of the annual deductions. (Nil if one of the owners has no taxable income of course). This will either reduce tax payable or enhance a refund.

However remember that Div 43 (cap allowances) are clawed back on sale. Assuming that over 12mths + then the lost benefit is halved so you are always at least 50% better off anyway.

I have just completed two returns - Two (jointly owned) taxpayers bought in 2003 and have claimed to date around $12K-$6K pa since that date. Value of the schedule to them so far has been $115K in deductions and a estimated increase in refunds of $38K. The report cost them $550 back in 2003. Great return on investment.