The three little property investors
Once upon a time there were three little investors, they each had $450,000 and wanted to buy a property in a suburb of Melbourne. The first little investor wanted his property to be brand spanking new. The second little investor thought it was better to buy something second-hand, but not too old. The third little investor liked the idea of buying a piece of history and so only wanted to see property built before 1985.
Mrs Deed (their mother) told them that out in the world there was a big bad tax wolf and if they weren't careful he would eat up all their money. The little investors said they would be extra careful and do all that was necessary to get the maximum tax deductions they were entitled to and so they set off on their property investment journey.
The first little investor spotted a brand new apartment right in the city centre and bought it straight away. The second little investor took several weeks to find a high-rise apartment that fitted her criteria of 5 years old and with a northerly aspect. The third little investor couldn't believe his luck when he found a character-filled place just a short tram ride outside the CBD.
Then tax time came.
The first little investor called up his tax depreciation expert Mr W.Brown to see how much he could deduct in his first year. He was thrilled to learn, using the diminishing value method, he would be able to deduct $12,000 in the first year alone.
The second little investor then had her depreciation report done. And while her apartment was older than her brother's, because she lived in a high-rise she was able to deduct $13,000 in the first year (using the diminishing value method).
It was now the third little investors turn. He was told by Mr W.Brown that while his house did indeed have much more character than the other two properties combined, it would only get $4000 worth of deductions in the first year.
And so now whenever any of the three little investors set off on a new investment property journey, they always make sure they have internet access and their handy smart phone loaded with the Washington Brown Depreciation Calculator.
The End.