Harnessing Depreciation for Industrial Property

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Chen, a prudent investor, seized the opportunity to minimise his tax liabilities by leveraging depreciation claims on his industrial property investment. His strategic approach not only led to significant tax savings but also optimised his overall financial position.

Property Profile

Chen’s investment was an industrial suite comprising an office area of 146 sqm and a warehouse area of 263 sqm. The property was built in 2016, and Chen purchased it in 2023 for $716,615.

Property Type	Industrial Suite
Office Area	146sqm
Warehouse Area	263sqm
Build Year	2016
Purchase price	$716,615

Depreciation Strategy

In the first year of ownership, Chen claimed $20,724 in depreciation, resulting in substantial tax savings of $7,668. Over the property’s lifespan, the total depreciation claim could amount to an impressive $359,758.

1st Year Claim	$20,724
1st Year Tax Savings	$7,668
Total Claim	$359,758

Financial Comparison

To illustrate the impact of Chen’s depreciation strategy, a comparison was drawn between scenarios with and without claiming depreciation.

	With Depreciation Claim	Without Claim
Rent received at $600 per week	$31,200	$31,200
Interest (6% of 80% borrowing of $716,615 purchase price)	-$34,398	-$34,398
Other expenses (property management, rates, etc.)	-$10,749	-$10,749
Cash outlay before depreciation (a)	-$13,947	-$13,947
Depreciation Year 1	-$20,724	$0
Total tax loss	-$34,671	-$13,947

Header	With Depreciation Claim	Without Claim
Tax Refund @ 37% (b)	$12,828	$5,160
Annual profit/loss to own property = (a + b)	-$1,119	-$8,786
Weekly profit/loss to own property	-$22	-$169

Conclusion:

Chen’s investment success underscores the importance of strategic tax planning in property investments. By capitalising on depreciation claims for his industrial property, Chen significantly reduced his tax liabilities and improved his overall financial position.

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