Did someone say free money?
The first time I heard Steve McKnight say, “not a free suck of the sauce bottle,” it clicked. Not growing up in Australia, it was the first time I’d heard that saying — and what a brilliant way to frame up this concept.
Nothing from the ATO is free. The ATO never loses.
Steve was talking about Depreciation. The ATO will never give money away for nothing.
No matter how it’s dressed up, or how clever the spreadsheet looks, nor how confidently it’s sold.
I’m not an accountant — and I don’t pretend to be any sort of tax expert. But I know a bad deal when I see one.
Here’s what too many investors get wrong:
- Depreciation is a tax deferral, not free money
- Capital works deductions increase capital gains by reducing the cost base
- Plant & equipment depreciation can be clawed back on sale
- If depreciation is what makes the deal work, it’s already a bad deal
2 rules for property investors to keep in mind:
- ATO always gets paid eventually (sale or balancing charge)
- Depreciation is not profit nor real cashflow
If an investment property “looks good” with the help of what you can claim from a depreciation schedule, the deal is worse than you think — not better.
A better idea would be, if you claim depreciation, set that cash aside for when the asset you’re depreciating actually needs replacing or repairing. And if you haven’t needed it by the time you sell, don’t kid yourself — that money was never yours.
Because whether you plan for it or not, the ATO will collect on exit. As surely as the sun rises in the morning.
And if you are thinking, “well I’ll never sell”, then there are bigger problems than this post can solve at this moment in time.
Believing you can outsmart the ATO with clever accounting gymnastics is nonsense.
This is how people end up with:
• Negative cashflow dressed up as a “tax benefit”
• Marginal assets held too long
• Large tax bills at exit
• Portfolios that look great in Excel but feel awful in real life
Same mistake I see with so-called “boom suburbs”: Temporary optics mistaken for real outcomes.
If you’re relying on depreciation to make a deal stack, you’re not investing — you’re probably fooling yourself.
Too many property investors are sold lemons by clever spruikers with an Excel spreadsheet, using depreciation to dress mutton up as lamb.
Real wealth in property is created through strategy, discipline, solving real problems, and adding genuine value to the market.
If you want to invest the real way, to create real wealth, message me and let’s talk
