Division Heading BuildCost Pty Ltd Depreciation Overview D Waters May 2014

Depreciation: Taxation concept of matching asset life to revenue over time Properties divided into two types of depreciable “classes” o Division 43. Essentially the ‘permanent’ portion of the building o Division 40. Defined as “plant and equipment”; removable fixtures and fittings within the investment property eg curtains, carpet, aircon, stoves, dishwashers – rates vary. Depreciation Overview 2

Can contribute as much in terms of tax deductions as negative gearing Increases return on investment Significant ongoing deductions when properties become positive geared Different methods can be used to align deductions to contributions Why Depreciate? 3

Scenario: $100K p.a PAYG income plus super Investment property. Built 2012, 2 nd year income $192K construction costs $200K 6.5% If reinvested at 5% compounding daily, would increase fund by $36000 over 25 years If directed as contributions into home loan, would save 30 months / $27,000 Case Study 4

Why BuildCost? o Local o Broad experience. 60 plus years experience across construction, consulting, accounting and taxation o Professional Membership Registered building practitioner CPA Australia Tax Practitioners Board – Full membership o Investment in systems and processes o Economies of scale o Flexible 5 Differentiator

Why Engage Depreciation Specialists? 6 Geelong. Pre 85. Minimal renovations by new owner. $ As at Income producing date Division 43 (Capital Works) 32, Division 40 (Chattels etc) 14, Total Available Depreciation as at Mar-14 47,479.68

Work with your estate agent to find a suitable property. As a general rule newer properties offer better deductions Depreciation is a good hedge for positive gearing Points to note 7