Tax depreciation is a deduction against assessable income whereby an investor can reduce the amount of tax payable. For example, investing in a residential property for income producing purposes may attract tax depreciation. A cash positive situation for your rental property results when an investor utilises the benefits and advantages of effective tax depreciation.
Crucial to any investment property is the need to reduce assessable income and therefore reduce tax payable.
For example, if you earn $90,000 a year from your employer and an additional $35,000 a year from say, two rental properties, your depreciation on both properties in any given year may be around $24,000.
Taking into account additional negative gearing factors such as interest on mortgage, repair and maintenance etc, your adjusted taxable income is: