A Cost per Week (CPW) summary is an incredibly important statement. Whether you have purchased a property through McCarthy Group, or just use us for tax, the CPW is an optional extra which gives you a clear picture as to how much your property is costing you.
For those of you who have received a CPW from us before, pull out an old copy and your Income Tax Return for that year. It will make understanding each step a lot simpler. If you haven’t received a CPW from us before, don’t worry! The CPW is an optional extra we offer to taxation clients, so if after reading this you feel like you need a copy, just give us a call and we’ll sort one out.
Be warned though, the CPW takes some time to prepare and during tax time we don’t have the means to prepare a large number of them. So if you want a CPW prepared, wait until after your Income Tax Return has been submitted to get in touch.
Let’s get into what the CPW is and what everything means. Below is an example of a CPW.
As you can see, the CPW is quite a simple document. Unlike the Rental Property Schedule from your Tax Return, which all figures within the CPW are based on, everything is quite simplistic and easy to understand. Nevertheless let’s break down each part of the CPW.
This is the first half of the CPW.
In Blue is your net rent, being the total rent you have made subtracted from cash and non-cash expenses, which can be found in your Rental Property Schedule under ‘Expenses’. This figure is what dictates your taxable income, in that the figure is typically negative, allowing you to ‘gear’ the loss you have made. i.e. reduce your taxable income.
In red is your non-cash expenses that you have claimed a deduction for, totaled in the orange section. These figures represent money you are getting back, so they are subtracted from net rent to give the total cash outlay you have had throughout the year.
Let’s now have a look at the second half.
This section is effectively putting the first half into practice, looking at the effect your investment property has had on your taxable income, and thus the amount you get returned to you.
The blue section relates to all of your tax figures with your investment property. Your taxable income is shown on your tax return, as is the value of your payable tax. Your effective tax rate is a ratio between your payable tax and your taxable income. So it is determined by dividing payable tax by taxable income.
The red section relates to what your taxation would look like without your investment property. It offers a good point of comparison, to show you what your property is actually doing for your financial situation. Your taxable income without your investment property is calculated by adding your actual taxable income with your net rent. The tax payable without your IP is calculated by the same income tax tables that your actual tax payable is created from. Finally your effective tax rate is calculated in the same way as before.
From here your tax saving, which is shown in green, is just a subtraction of your tax payable excluding your property with your actual tax payable. From here you want to know how much you have been out of pocket for the year, which is a subtraction of your total cash outlay from the first section, with your tax savings. Finally to determine the weekly cost of this, the figure is divided by 52.
So that’s it, the CPW explained!
Keep in mind, the CPW is an optional service that McCarthy Group offers through McCarthy Accountants. If at any point you would like a CPW prepared for you, we require at least one month’s notice (especially around tax time).