July 2020: the first depreciation cycle of the new era
With JobKeeper extended and rates at zero, the depreciation schedule on a new-build asset was worth more than ever — because every dollar of deduction was sheltered from a higher effective marginal rate.
The mechanics
Division 40 (plant and equipment) and Division 43 (capital works) depreciation on a new-build dwelling typically delivered $8,000–$15,000 of non-cash deductions in the first full year. With many investors temporarily on lower incomes through JobKeeper, the play was to front-load the build now and have the deductions land in FY22 when income normalised.
What I told Sky News viewers
If you couldn't service a new loan in July 2020, you weren't supposed to. If you could, the math was the clearest it had been in a generation: zero-bound rates, full depreciation envelope, government-subsidised supply.
Dax Stanley
Founder & Principal Strategist, Hera Property. #1 international bestselling author of Real Estate Investing Using ChatGPT.