Paul’s Business Investment: A Case Study

Paul, recognised the importance of maximising tax benefits in his property investments and claimed depreciation on his newly acquired office building, resulting in significant tax savings and enhanced cash flow.

“As an experienced property investor, I was looking to diversify my portfolio by investing in an office building with strong potential. Like any investment, maximising financial opportunities is crucial to its success. One key area I wanted to focus on was tax depreciation, an often overlooked but incredibly powerful tool in property investment.

After extensive research, consultations with my accountant, and site visits, I identified a promising office building. It was my first time investing in this type of property, so I felt a bit nervous and hesitant. To ensure I fully understood the tax depreciation implications on my cash flow, I reached out to Washington Brown for expert advice before making the purchase.

From the outset, the team guided me with professionalism and clarity, easing my initial concerns. They provided clear insights into the tax deductions available, which helped me when making a decision. I had a great experience with Washington Brown, and their support played a key role in finalising my investment.”

Property Profile:

Paul’s investment was an office suite spanning 143 sqm, built in 2014. He purchased the property in 2021 for $1,120,000.

Property Type Office Suite
Internal Area 143sqm
Build Year 2014
Purchase Price (2021) $1,120,000

Depreciation Strategy:

In the first year of ownership, Paul claimed depreciation amounting to $16,927, resulting in substantial tax savings of $6,263. Over the property’s lifespan, the total depreciation claim could reach an impressive $373,096.

1st Year Claim $16,927
1st Year Tax Savings $6,263
Total Claim $373,096

Financial Comparison:

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

With Depreciation Claim Without Claim
Rent received at $850 per week $44,200 $44,200
Interest (6% of 80% borrowing of $1.12M purchase price) -$53,760 -$53,760
Other expenses (property management, rates, etc.) -$10,080 -$10,080
Cash outlay before depreciation (a) -$19,640 -$19,640
Depreciation Year 1 -$16,927 $0
Total tax loss -$35,567 -$19,640
Tax Refund @ 37% (b) $13,530 $7,267
Annual profit/loss to own property = (a + b) -$6,110 -$12,373
Weekly profit/loss to own property -$118 -$238

Conclusion:

Paul’s investment success highlights the importance of strategic tax planning in property investments. By claiming depreciation on his office building, Paul was able to significantly reduce his tax liabilities and improve his cash flow. For business owners seeking to maximise returns and minimise tax burdens, leveraging depreciation benefits proves to be a valuable strategy in the realm of commercial property investment.