Maximising Returns: How Arnav Leveraged Depreciation to Boost Tax Savings and Cash Flow in Real Estate Investment
Arnav’s Journey: A Case Study in Depreciation Benefits for House and Land Investments
Property Overview
Arnav’s investment journey began with the purchase of a newly built house and land property, boasting four bedrooms, two bathrooms, and spanning an area of 290 sqm. The construction, completed in 2025, came at a cost of $433,500.
|
Property Type |
Newly Built House |
|
Bedrooms |
4 |
|
Bathrooms |
2 |
|
Internal Area |
290sqm |
|
Build Year |
2025 |
|
Construction Cost |
$433,500 |
Depreciation Analysis
Depreciation proved to be Arnav’s key ally in optimising his investment’s financial performance. In the first year alone, he claimed a substantial $24,467 in depreciation, translating to significant tax savings of $9,053 based on a tax rate of 37%. Over the projected ownership period, his cumulative depreciation claim totals an impressive $430,808.
|
1st Year Claim |
$24,467 |
|
1st Year Tax Savings |
$9,053 |
|
Total Claim |
$430,808 |
Financial Impact Comparison
Arnav’s use of depreciation not only shielded him from significant tax liabilities but also bolstered his cash flows, enhancing the overall profitability of his investment.
 |
With Depreciation Claim |
Without Claim |
|---|---|---|
|
Rent received at $900 per week |
$46,800 |
$46,800 |
|
Interest (6% of 80% borrowing of $433.5k construction cost and $400k land price) |
-$40,008 |
-$40,008 |
|
Other expenses (property management, rates, etc.) |
-$12,503 |
-$12,503 |
|
Cash outlay before depreciation (a) |
-$5,711 |
-$5,711 |
|
Depreciation Year 1 |
-$24,467 |
$0 |
|
Total tax loss |
-$30,178 |
-$5,711 |
|
Header
|
With Depreciation Claim |
Without Claim |
|---|---|---|
|
Tax Refund @ 37% (b) |
$11,166 |
$2,113 |
|
Annual profit/loss to own property = (a + b) |
$5,445 |
-$3,598 |
|
Weekly profit/loss to own property |
$105 |
-$69 |
Conclusion:
Arnav’s success story highlights the pivotal role of depreciation in real estate investments. By strategically leveraging depreciation, investors like Arnav can not only mitigate tax burdens but also amplify cash flows, ultimately optimising returns on investment. In today’s dynamic real estate landscape, harnessing depreciation emerges as a fundamental strategy for maximising profitability and fostering long-term wealth accumulation.
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