Dear Clients, Associates & Friends,
Welcome to our De Freitas & Ryan Monthly E-News Update.
2009 has begun well despite all the doom and gloom that is currently around us. Lots of real estate activity as people cautiously juggle their property needs both residential and investment in an increasingly difficult market.
In times like this, we all need to be ’on the ball’ and make every cent count and in this month’s newsletter, I am going to discuss tax depreciation that can result in many thousands of dollars in savings to investors.
At De Freitas & Ryan, we are proud of the property portfolio that we have built and we are always looking to improve the service we offer to our clients.
We as real estate agents are however, not experts in accurately determining the depreciation deductions available in an investment property and for that matter, neither is your accountant. Quantity surveyors are recognized under Australian Taxation Office (ATO) legislation as qualified to estimate construction costs for depreciation purposes. Using the services of a quantity surveyor who specializes in depreciation will ensure that an investor receives the maximum deductions available.
I am going to provide you with the following two scenarios to demonstrate where you as a property owner can benefit.
| Scenario — Residential Property:
Jane owns a 2 bedroom unit, which was purchased for $400,000. She obtains $385 per week in rent (totalling approx $20,000 per year). Her expenses (including interest, rates, management fees) total approx $36,000 per year. | Scenario — Commercial:
Darren owns a commercial office building, which was purchased for $1.1 million. He leases it to a tenant for $1800 per week (totaling approx $94,000). His expenses (including interest, rates, management fees) total approx $124,000 per year. |
| No Depreciation Claim | Tax Depreciation Claim | No Depreciation Claim | Tax Depreciation Claim |
|---|---|---|---|
| Pre-Tax Cash Flow
Loss: $16,000 | Pre-Tax Cash Flow
Loss: $16,000 Depreciation: $12,000 | Pre-Tax Cash Flow
Loss: $30,000 | Pre-Tax Cash Flow
Loss: $30,000 Depreciation: $40,000 |
| Total Deduction: $16,000
Post Tax-Cash Flow (tax rate 40%) Tax Refund: $6,400 Net Cash Outlay: $9,600 Cash outlay Per Week $185 | Total Deduction: $28,000
Post Tax-Cash Flow (tax rate 40%) Tax Refund: $11,200 Net Cash Outlay: $4,800 Cash outlay Per Week $92 | Total Deduction: $30,000
Post Tax-Cash Flow (tax rate 30%) Tax Refund: $9,000 Net Cash Outlay: $21,000 Cash outlay Per Week $404 | Total Deduction: $70,000
Post Tax-Cash Flow (tax rate 40%) Tax Refund: $21,000 Net Cash Outlay: $9,000 Cash outlay Per Week $173 |
Yes, there is a mechanism available in the Australian Taxation system that enables property investors to claim a deduction related to wear and tear on the structure of an investment property and the depreciation of the plant and equipment items contained within it. Ensuring that these deductions are maximised generally result in more cash flow for the investor. By maximising tax depreciation, your investment property becomes more tax effective.
If you are at all interested in being referred to a quantity surveyor to complete a depreciation schedule, please contact our General Manager, Dalena Lindstrom on (08) 9499 6000.
We’ve had some excellent feedback from our newsletters and one comment that keeps on appearing is that we should detail a few properties each month that we recommend you consider.
We have detailed the following properties and should you require further information, please contact the relevant Sales Consultant direct.
1. Unit 5/4 Bristol Avenue, Warnbro
Two year old 3 bedroom villa home in nice complex, two carparks, semi ensuite and would rent for $280 per week.
Priced to sell at $298,000.
Contact: Tanya 0408 480 914
2. 4 Seabrook Way, Medina (Kwinana)
1214 sq metres of light industrial land with some modest improvements. Ideal for builder, plumber or investor to build properties on. Must be sold due to circumstances.
Suit $300,000 plus buyers.
Contact: Miguel 0417 268 465
3. Unit 1/9 Blackly Row, Cockburn Central
Leased commercial investment. Stylish warehouse/office located in huge growth area. Leased to national tenant for $42,636 per annum plus all outgoings. You can’t go wrong here.
Price is $599,000 and there is no GST as this is a going concern.
Contact: Travis 0422 609 822|
To see these properties and others, head to our website at
www.defreitasryan.com.au
Thank you for taking the time to read our newsletter and we look forward to keeping in touch in 2009.
The Team at De Freitas & Ryan
