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Should you furnish your rental property?

BMT team — Thu, 07 Mar 2024 22:12:14 +0000

Have you considered leasing out your investment property furnished? When you furnish a rental property, the furnishings become part of the Division 40 plant and equipment assets allowing you to claim depreciation deductions for the wear and tear of the furniture over their effective lives, reducing your taxable income. To help you weigh up the pros and cons of renting out your property furnished, BMT has answered some commonly asked questions when it comes to rental furnishings. Q: Is furniture tax deductible for rental property? A: In most cases, furniture purchased by an investor for an income-producing property will attract depreciation deductions. Depreciation refers to the natural wear and tear a property and its assets experience over time. The Australian Taxation Office allows investors to claim a deduction for this wear and tear. Furniture within an income-producing property is typically claimed as a plant and equipment deduction, which refers to the easily removable items within an investment property. To be eligible to claim depreciation for furniture within a rental property, you must: purchase the items when the property is income-producing or genuinely available for rent directly incur the cost of the furniture. Q: What’s the easiest way to claim deductions for furniture? A: A tax depreciation schedule is the best way to ensure you claim all the deductions you’re entitled to. A BMT Tax Depreciation Schedule covers all deductions available over the lifetime of a property (forty years) and is 100 per cent tax deductible. During the FY 2022-2023, BMT found residential property investors an average first year deduction of almost $9,000. Q: Can I claim deductions on second-hand furniture? A: The short answer is no. While second-hand furniture can be a cost-effective option, it’s ineligible for depreciation deductions. This is due to 2017 legislation changes that disallow depreciation deductions to be claimed on second-hand plant and equipment assets. This includes those that still have remaining depreciable value. Q: Can I charge higher rent if the property is furnished? A: A landlord can typically charge a higher rental rate for a furnished property. Depending on your location and property type, you may be able to charge between 15 to 70 per cent more. While this seems like a fantastic return on an investment, any landlord considering furnishing a rental property should first consider the reduced tenant demand. Most tenants are looking for unfurnished property, so be sure to assess your local property market carefully. Q: What type of tenants will a furnished property attract? A: Furnished properties typically attract travellers, young tenants who haven’t accrued their own furniture and business professionals who frequently move for work. With this in mind, furnished leases reflect the intermittent nature of such tenants and are usually between three and six months long. These types of leases are usually suited to major metropolitan areas or smaller regional centres that have a fly-in fly-out lifestyle. Q: What happens if my furniture is damaged? A: If the lease states that you are renting out a furnished house with appliances, then you’re not only responsible for keeping the building in good shape, but the furniture and appliances as well. However, if the tenant damages your belongings, you may be entitled to make an insurance claim so it’s important to have proper cover. Landlord insurance is a type of insurance policy designed to protect property investors from tenant-related risks including loss of rental income and malicious or accidental damage caused by the tenant. As landlord insurance is an investment expense, it can also be claimed in your annual tax return. It’s important to note that each landlord insurance policy will differ. For more information, contact BMT Insurance on 1300 268 467. Q: When is it a good idea to have an unfurnished property? A: An unfurnished property is more likely to appeal to tenants looking for a home over the long-term. Typically, this means that leases will be for six to twelve months. Some tenants prefer the opportunity to furnish the property and can be put off by a landlord’s furniture. This is especially the case if a tenant already has their own furniture that would need to be stored elsewhere. If you’re undecided on what to do, perhaps advertise your rental as unfurnished and include the option to have it furnished for additional rent in the listing description. There are a number of advantages and disadvantages to furnishing an investment property. It’s important for investors to consider their personal circumstances before making a decision.

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Tax deductions every agribusiness owner should claim

BMT team — Sat, 20 Jan 2024 05:05:16 +0000

Agribusiness is satisfying but tough. Farmers often experience times of financial hardship due to circumstances out of their control. Droughts, floods and commodity price fluctuations can all dramatically affect a farmer’s bottom line each season. But agribusiness isn’t just about the season. It’s about long-term planning and making decisions now that will produce results in the future. Claiming depreciation is just one of the ways farmers can prepare for a more sustainable agribusiness. The Australian Taxation Office (ATO) governs legislation that allows owners of any income-producing property to claim depreciation every financial year. These deductions can help boost a farmer’s cash flow and alleviate the pressure of farming during an unforgiving season. The additional funds you receive at tax time can then be used to buy more stock or cover any outstanding expenses you need to pay. So, what is depreciation and are you eligible to claim it? Contents Depreciation for agribusiness Agribusiness case study Maximise the return on your agribusiness Depreciation for agribusiness Depreciation is a tax deduction for the gradual wear and tear of an income producing building and its assets over time. It’s often missed by agribusiness owners because it’s a non-cash deduction, meaning you don’t need to spend money in order to claim it. In fact, research has shown that 80 per cent of owners are missing out on the depreciation deductions they’re entitled to. A deduction can be claimed for any building structure via capital works deductions and depreciaiton can be claimed for the plant and equipment assets. Plant and equipment assets refer to items which can be easily removed from the property and have a limited effective life as set by the ATO. While most fixtures and fittings can be depreciated following standard procedure, certain assets used in agribusinesses must be calculated using special rules. These assets are as follows. Water facilities used to conserve or convey water Primary producers can fully deduct capital expenditure on a water facility if the expense was incurred on or after 7:30pm AEST on 12 May 2015. Primary producers fully deduct the expenditure in the income year in which they incurred it. The total deduction cannot be more than the amount of the capital expenditure. No deduction is available for capital expenditure incurred on acquiring a second-hand commercial water facility unless you can show that no one else has deducted or could deduct an amount for earlier capital expenditure on the construction, manufacture or previous acquisition of the water facility. The previous UCA (uniform capital allowance system) rules of depreciation apply where expenses were incurred prior. Fencing assets The cost of capital expenditure of fencing assets can be fully deducted if the expenditure was incurred at or after 7.30pm (AEST) on 12 May 2015. The total deduction cannot be more than the amount of the capital expenditure. The term ‘fence’ takes its ordinary meaning and includes an enclosure or barrier, usually of metal or wood, as around or along a field or paddock. The term ‘fence’ extends to parts or components of a fence including, but not limited to, posts, rails, wire, droppers, gates, fittings and anchor assemblies. The capital expenditure incurred on the construction, manufacture, installation or acquisition of the fencing asset must have been incurred primarily and principally in a primary production business that you conduct on land in Australia. The lessee of the land is also eligible to claim these deductions for fencing assets. Fodder storage assets If a cost was incurred on a fodder storage asset, it can be immediately deducted in the income year it was incurred, if the expense was incurred either: on or after 19 August 2018, or before 19 August 2018, but the asset was first used or installed ready for use on or after 19 August 2018. If the capital expenditure was incurred after 7.30pm (AEST) on 12 May 2015 but before 19 August 2018, and the asset was first used or installed ready for use before 19 August 2018, one-third of the expenditure can be deducted in the income year in which the expenditure is incurred, and the same amount in each of the following two income years. Horticultural plants (including grapevines) Deductions for the decrease in value of horticultural plants can be claimed by primary producers, under the following conditions: Ownership of the plants (including lessees and licensees of land, who are considered as owners of the horticultural plants on that land). Use of the plants in a horticulture business to generate assessable income. The expense was incurred on or after 9 May 1995 (or for grapevines, on or after 1 October 2004). If you are a primary producer and a small business entity, you can choose to work out your deductions for water facilities, fencing and fodder storage assets under either the simplified depreciation rules or these UCA rules. Horticultural plants can only use UCA to work out deductions. According to the Tractor Machinery Association of Australia, $5.6 billion was spent on agricultural machinery in Australia in 2022, an estimated increase of nine per cent from 2021. Given that farmers are continually updating their plant and equipment assets, it’s essential to organise a tax depreciation schedule this financial year. Agribusiness case study The farmer owns an 800-acre dairy farm in regional Victoria, which he purchased for $3,626,000. The business identifies as a small business entity. The farmer decides to enlist BMT Tax Depreciation to prepare a tax depreciation schedule after hearing about the deductions he could claim. Examples of some of the deductions he can claim include cattle laneways, water dams, sheds, fences, dairy milking sheds, dairy yards and milking systems. From the tax depreciation schedule, he finds out he can claim a huge $345,300 in depreciation deductions in the first financial year alone and a massive $1,575,000 in the first five cumulative years. View the full case study on the 800 acre dairy farm Maximise the return on your agribusiness BMT found agricultural clients an average of $96,458 in first full year depreciation deductions in the 2022/23 […]

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2023 Property Market Year in Review

BMT team — Mon, 20 Nov 2023 22:47:43 +0000

Despite ongoing interest rate hikes, high inflation and a subsequent ease in consumer spending, the residential property market has shown resilience with a 7.0% growth rate in the year to November 2023. As at the end of November, residential real estate constituted $10.3 trillion of Australia’s wealth, with superannuation at $3.5 trillion, Australian listed stocks at $2.8 trillion, and commercial real estate at $1.3 trillion following closely behind. RESIDENTIAL AND COMMERCIAL PROPERTY VALUES There has been renewed growth in the capital cities property market this year. Brisbane properties have shown growth at an impressive 10.7% over the past year and dwelling values are currently at a record high. Perth has taken a definitive lead at a growth rate of 13.5%, followed by Adelaide which has shown a slowdown from a significant 13.4% in November 2022 in comparison with a growth rate of 7.6% in November 2023. In Sydney, dwelling values increased by 10.2% over the past year, but are still below the record highs of January 2022 and Melbourne showed a respectable 3.0% growth over the past year. Canberra, Darwin and Hobart have struggled to get above the line this year with values falling by -0.3% in Canberra, -1.5% in Darwin and -3.0% in Hobart respectively. The rise in the value of regional property has also slowed across the country showing a more moderate growth rate of 3.4% as of November 2023 compared to the 10.1% growth rate seen at the same time last year, suggesting a potential downtrend in the tree change and a return to city life for many. PROPERTY SALES Most residential homes across Australia take approximately 32 days to sell, with 10.2% more properties on the market across Australia, than the same time a year ago. Perth has once again broken the trend, selling within less than 12 days, highlighting the lack of availability and rise in demand in the already heavily burdened property market in Western Australia. RENTAL PROPERTY MARKET As always, rental rates in the capital cities have shown significant growth at 9.7%, followed by a much more muted growth rate of 4.1% in regional areas. Rental rates across Australia as a whole have averaged 8.1%. According to CoreLogic, there has been a slight compression in gross rent yields nationally to 3.69%, which is down from 3.70% the previous month. LOAN APPROVALS AND CREDIT Covid era fixed rates expired this year, forcing many Australians into mortgage stress, spending well above the recommended 30% of their income on mortgage payments. In 2020 the average three – year fixed rate investor loan was at 2.2%. For some, this has now increased to a comparable variable rate loan of up to 7.21% with the Big Four banks, averaging 6.0% for owner occupiers and 6.49% for investors. Lending standards tightened for all residential and commercial real estate loan categories, but secured, tenanted investors are still positively favored by banks with investor finance comprising 35.6% of new mortgage lending through October. This share of investment lending was highest across NSW at 40.4% and is trending higher than the historic average at the national level. Most owner-occupier loans granted this year were first time buyers, comprising 28.9% of new owner occupier finance, which is well above the decade average of 24.2%. indicating a positive uptake of government schemes for this market segment. In terms of the number of dwellings approved for construction, both detached home – and unit approvals trended well below the historic 10-year average, with units trending even lower than detached homes. INTEREST RATES The 25-basis point Melbourne Cup Day rate hike has taken no one by surprise, leaving 1 in 4 lenders now with loans greater than their incomes according to the Reserve Bank of Australia. The number of Australians defaulting on their home loans, now surpasses the mortgage stress peaks of the Global Financial Crisis, however, returns on interest bearing investments, such as term deposits, have been favorable. Many mortgage customers have also found a way forward by refinancing their loans at more competitive rates. BMT NEWS As quantity surveyors, we have been steadfast in our approach to depreciation, believing that a physical onsite inspection will ensure an accurate and reliable depreciation schedule that will earn the owner the highest possible tax deductions. In 2023 our stance was validated by the Australian Institute of Quantity Surveyors, whose principal mission it is to establish and uphold professional standards at all times, maintain uniformity in procedures, support industry education, and foster public faith in cost certainty and the quantity surveying profession overall. Since opening its doors in 1997, BMT Tax Depreciation has completed more than 900 000 tax depreciation schedules to date, averaging first full financial year deductions of almost $9 000,00 in all residential properties and more than $15 000,00 in new properties, once again cementing our position as market leaders in tax depreciation. To maximise property tax depreciation deductions on your property, Request a Quote from us. The information in this article is sourced from CoreLogic and the Reserve Bank of Australia. This article is general in nature and should not be taken as advice or a guaranteed outcome.

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The BMT process: who does what?

BMT team — Mon, 25 Sep 2023 22:45:13 +0000

Research shows that around 80 per cent of property investors are missing out on depreciation claims. If you’re one of those property investors, you could be missing out on thousands of dollars each financial year. Fortunately, arranging a BMT Tax Depreciation Schedule is simple and stress-free. BMT Tax Depreciation takes a comprehensive approach to preparing depreciation schedules for both residential and commercial property to ensure every deduction is maximised. In this article we will look at: An overview of the BMT process Quantity surveyors in the BMT process Property managers in the BMT process Accountants in the BMT process An overview of the BMT process The BMT process begins when you request a quote for a tax depreciation schedule. This can be done by phone or online. Once you’ve requested a quote, we’ll collect the basic information we need from you in one go and do some initial calculations to ensure the schedule is worthwhile. This includes simple details like: the name you would like to appear on the report the property address purchase information you property manager and accountant details. For residential investors, we can then contact your property manager or tenant to arrange access for a property inspection. Using their expertise, BMT site inspectors will thoroughly assess the capital works and plant and equipment assets found within your property. In the case of apartments or strata complexes, this includes all common property items where legislation allows. From there, our depreciation and tax specialist team will review the information gathered, do additional research to establish construction and purchase dates, check for any additional works and prepare your tax depreciation schedule. We can even forward your schedule to your accountant directly, saving you time. Given the 2017 legislation changes, it’s essential to contact a specialist quantity surveyor to assess your property. Both new and old residential investment properties have substantial depreciable value. On average, we find residential investors a first full financial year claim of almost $9,000. In commercial properties, both the owner and tenant can claim depreciation deductions. Our tax depreciation schedule can include separate reports where multiple entities or tenants control different assets or have different acquisition dates. All schedules for commercial property are prepared according to their particular industry. We’ve completed thousands of schedules for all commercial property types including agricultural industries, manufacturing, automotive and mechanical, industrial and warehouse, hospitals and medical centres. Using industry specific legislation, a specialist site inspector will assess your property to ensure every deduction is uncovered and maximised. This includes any fit-out installed or assets removed during an upgrade or renovation. When construction work or assets are removed from a property during its income production period, there is often remaining unclaimed depreciation that can be written off. BMT staff are experts at calculating this residual amount and will make the necessary adjustments to your schedule. Now that you have a good understanding of the BMT process, let’s look more closely at the specialists involved. Quantity surveyors in the BMT process Quantity surveyors are qualified professionals who specialise in building measurement and estimating the value of construction costs. They get involved at various stages throughout a buildings construction and use their skills to ascertain the costs of building works on any project. A specialist quantity surveyor: documents every qualifying asset in a property calculates their depreciable value to ensure that the investor maximises their deductions ensures full compliance with Australian Taxation Office (ATO) regulations, meaning all deductions are accurately evidenced in the event of an audit. To work as a quantity surveyor in Australia, you’re required to gain qualifications in quantity surveying or construction management by competing a university degree. You’re then required to do two years’ worth of logbook experience before undergoing a panel interview with the Australian Institute of Quantity Surveyors (AIQS) and the Royal Institution of Chartered Surveyors. When looking for a quantity surveyor, check that they use their own specialist staff rather than contractors for parts of the process. This is important in the evidence of an audit or if the ATO have any questions regarding the process. Another crucial thing to be aware of is referral fees. Ensure that there are no referral fees or kickbacks being paid. You want to use the best in the business, not the quantity surveyor who is paying the most. It’s also important to be aware that not all quantity surveyors specialise in tax depreciation. Only a tax depreciation specialist such as BMT can be relied on to maintain detailed knowledge of all current ATO Tax Rulings relating to depreciation. Property managers in the BMT process As a part of the BMT process, we will collect the necessary information on who to contact in order to arrange a site inspection. As properties need to be income producing before depreciation can be claimed, we’ll often need to speak with your property manager to arrange access to your investment property. We’re flexible with these arrangements to ensure minimal disruption to your tenant during this period. Working with your property manager allows for easy organisation, helps the tenant or tenants to understand why the site inspection is taking place and eliminates admin for you as the landlord. BMT also provides a number of services and tools to help inform property managers on depreciation benefits including New to Rent. New to Rent gives property managers complimentary depreciation estimates tailored to each rental property listed by their agency. The estimates highlight the difference depreciation can make to your cash flow and will help you to determine your after-tax position. Accountants in the BMT process Your accountant is often one of the last to find out about your investment property. This means there’s often a lot of last minute activity to be completed within a short timeframe to ensure that your claim is maximised at the end of each financial year. That’s where BMT can help. A BMT Tax Depreciation Schedule provides accountants with all the necessary information to lodge an accurate claim. We also provide access to MyBMT that […]

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Investing in childcare centres

BMT team — Mon, 11 Sep 2023 05:09:39 +0000

The demand for reliable childcare services continues to surge, making owning and operating childcare centres a strategic move that positions owners at the heart of this growing demand while contributing to essential community support. In contrast to industries that experience fluctuations tied to economic cycles, childcare services offer a more dependable income stream. The enduring need for high-quality childcare results in consistent occupancy rates and reliable cash flows. This inherent stability provides owners with a solid financial foundation, shielding them from the volatility that often characterises other sectors. This article examines the benefits that investing in childcare centres provides to owners, including depreciation deductions and the Small Business Energy Incentive. Unlock financial potential with depreciation A significant financial benefit of investing in childcare centres lies in depreciation deductions. Depreciation can be claimed on both a property’s structure and permanent assets (categorised as capital works deductions) and easily removable or mechanical assets (categorised as plant and equipment depreciation). Examples of capital works in a childcare centre could include things like sinks and basins, flooring and sand pits. Plant and equipment assets would be items like free-standing furniture, kitchen appliances and play equipment. By claiming depreciation, owners can effectively decrease their taxable income, leading to enhanced cash flow and reduced tax liabilities. Childcare centres can yield substantial depreciation deductions, enhancing the financial appeal of these investments. Small Business Energy Incentive The Small Business Energy Incentive offers a pathway to align investment with sustainability goals. Under the Small Business Energy Incentive, businesses with an aggregated turnover of less than $50 million can deduct an additional twenty per cent of the cost of eligible depreciating assets that support electrification and more efficient use of energy. Businesses can qualify for this incentive on a total expenditure of up to $100,000 for which the cost is incurred, between 1 July 2023 and 30 June 2024, with a maximum bonus deduction capped at $20,000. Childcare centres can adopt energy-efficient technologies, accessing incentives that not only reduce operational costs but also contribute to a greener future. This enhances profitability while supporting responsible environmental practices. Instant Asset Write-Off The Instant Asset Write-Off allows small businesses using the simplified depreciation rules to claim an immediate deduction for the business portion of qualifying assets. Under the Instant Asset Write-Off, businesses with an aggregated turnover of less than $10 million can immediately deduct the full cost of qualifying assets costing less than $20,000 that are first used or installed ready for use between 1 July 2023 and 30 June 2024. This is on a per-asset basis, meaning multiple assets can be written off as long as they qualify. Case study: Childcare centre applies available government incentives In August 2023, “Harry’s Childcare Centre” undertook a facility upgrade, allowing the owners to qualify for both the Small Business Energy Incentive and the Instant Asset Write-Off. The upgrade involved the installation of new furniture, equipment, and energy-efficient assets, leading to a substantial reduction in taxable income and enhanced financial returns. BMT illustrates the application of the Instant Asset Write-Off and the Small Business Energy Incentive. Table 1: Application of the Instant Asset Write-Off Table 1 demonstrates the application of the Instant Asset Write-Off and the assets installed. The implementation of the Instant Asset Write-Off provided an immediate deduction of $20,243 for eligible assets. For the purpose of this case study, the assets have been grouped together, however, the Instant Asset Write-Off is applied on an asset-by-asset basis. Table 2: Application of the Small Business Energy Incentive Table 2 illustrates the breakdown of how the Small Business Energy Incentive is applied to energy-efficient assets. Thanks to the twenty per cent bonus, an extra $3,092 was claimed in addition to the initial $15,461, resulting in a total of $18,553 for this incentive. Overall, the owners of Harry’s Childcare Centre were able to claim a total of $38,796 in addition to their annual depreciation claim through the application of the Small Business Energy Incentive and the Instant Asset Write-Off. This allowed them to recoup a portion of the costs associated with the upgrades in the same financial year. For investors seeking diversification and scalability, childcare centres offer a compelling avenue. With scalability as a foundational principle, you can expand your investment portfolio, explore untapped markets, and establish multiple revenue streams. The rising demand for quality childcare services positions your investment for sustainable expansion and long-term prosperity. To gain further insights into how investors can effectively integrate depreciation into their investment strategies, reach out to BMT on 1300 728 726 or Request a Quote.

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AIQS guidelines reinforce BMT’s unwavering commitment to site inspections

BMT team — Mon, 21 Aug 2023 05:18:00 +0000

A paper released by the Australian Institute of Quantity Surveyors (AIQS) has emphasised the importance of completing site inspections in creating accurate and compliant tax depreciation schedules. This supports BMT Tax Depreciation’s unwavering dedication to conducting site inspections, even amid the challenges posed by COVID-19 lockdowns. The AIQS has introduced a clear standard for ethical conduct and collaboration within the industry: “The Quantity Surveyor’s Guide to Residential Tax Depreciation,” which presents a comprehensive framework designed to minimise risks. The guide promotes industry-wide consistency, prevents unethical practices, and ensures the protection of clients, accountants, and quantity surveyors. BMT was consulted during the process. Not all tax depreciation schedules are created equal. This distinction becomes clear when observing the various categories of schedules and the extensive spectrum of expenses presented by quantity surveying companies all over the country. Examples of such variations include the offering of cheap self-assessed schedules, promises of significant deductions prior to schedule preparation, and the utilisation of online property portals as an alternative to site inspection. To complete a comprehensive tax depreciation schedule, it’s essential to conduct a physical site inspection. It’s impossible to identify every depreciable asset, renovation and hidden expenditure like wiring, plumbing and extensions completed by previous owners without a thorough inspection completed by a specialist. This position is endorsed by the AIQS and the National Tax and Accountants’ Association. Notably, according to BMT Tax Depreciations own data from preparing over 800,000 tax depreciation schedules, approximately 66 per cent of investment properties have undergone some form of renovation, underscoring the significance of thorough inspections. BMT’s commitment to accuracy is exemplified through its rigorous site inspection process. BMT conducts thorough on-site assessments to ensure every depreciable item is identified, leading to more accurate and maximised claims for clients. In situations where a site inspection can’t be conducted, as outlined in this guide, the quantity surveyor is required to provide the client with a formal statement detailing the reasons behind this limitation. A disclaimer must be included in the statement, indicating that the report’s accuracy may be compromised, and the author assumes no liability for any resulting inaccuracies. It’s important that property investors recognise the significance of this; once a schedule is finalised, the quantity surveyor responsible for its preparation bears no responsibility or liability for any potential audits or offers assistance in such situations in the event of inaccuracies. When seeking a tax depreciation schedule, investors are encouraged to inquire about how compliance is achieved and the process with the quantity surveyor. In a landscape where collaboration among professionals is common, the guidelines also set a clear standard for ethical conduct when it comes to referral fees. In cases where a quantity surveyor is involved in the exchange of referral fees with an accountant, property manager, or any other third party, this must be disclosed to the client. This principle ensures transparency and integrity, fostering a sense of trust among all parties involved. A hallmark of BMT’s transparent and client-centric approach is the company’s policy of not paying referral fees to third parties. This reinforces BMT’s dedication to providing unbiased advice and ensures that its recommendations are solely based on the best interests of clients. BMT leads the industry in tax depreciation expertise, which is evident in their ability to achieve higher deductions and robust tax depreciation schedules in the event of a client ATO audit. The AIQS’s release of these guidelines signifies a new era of collaboration, transparency, and ethical practices in property depreciation. BMT Tax Depreciation’s commitment to ATO compliance provides investors with a rock-solid foundation. Their expert team meticulously follows the ATO and AIQS guidelines to generate accurate and compliant tax depreciation schedules. This compliance ensures that investors remain on the right side of the law while harnessing the full potential of their property investments. For more information on BMT’s compliant tax depreciation schedules, call the experts on 1300 728 726 or Request a Quote.

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2023 property market update

BMT team — Sun, 02 Apr 2023 23:14:25 +0000

2022 was an interesting year for the property market. Interest rates and rental yields increased, while property prices fell. Nonetheless, Australian investors persevered and made it through this challenging year. We sat down with Bradley Beer, Chief Executive Officer of BMT, and asked him some questions surrounding the property market outlook of 2023 and the latest BMT news. Read on for Bradley Beer’s insights into the year so far and what may lie ahead. What did the Australian property market look like in 2022? The value of the residential real estate market fell from $9.6 trillion in December 2021 to $9.3 trillion in December2022. Australian national housing values fell 5.3 per cent over 2022, the largest calendar-year decline since the Global Financial Crisis in 2008 where values fell 6.4 per cent. The median price of a residential dwelling as of 31 December 2022 was $708,613 with combined capitals at $770,374 and combined regionals at $577,616. What can we expect from the housing market in 2023? I expect that property prices will continue to fall as long as interest rates are rising. It is likely that sales from owners unable to service their loans due to interest rate rises and inflation will increase, with 35 per cent of outstanding housing credit on fixed terms and around two-thirds of these expiring in 2023. And what about interest rates? At 7.8 per cent, the Consumer Price Index (CPI) is still well above the RBA’s target of 2-3 per cent. To return inflation to target, the RBA has lifted the cash rate every month from May, with it now sitting at 3.60%, the highest rate in eleven years. It is expected that inflation will return to 4.7 per cent over 2023 and 3.2 per cent over 2024. How are rental markets performing so far in 2023? Rental markets have remained firm so far throughout 2023, with the current national rental vacancy rate sitting at a record low of 1.0 per cent. As of January 2023, gross rental yields were 3.9 per cent, a growth of 0.7 per cent from January 2022. CoreLogic reported annual growth in Australian rent values of 10.2% in the 12 months to December, a record high. The most rapid annual rise is evident in unit rents across Sydney, Melbourne and Brisbane, where rents have increased around 14 to 17% annually. What is loan activity looking like? The percentage of investor loans increased by 5.3 per cent between September 2019 and September 2022. New variable home loan rates for owner occupiers increased from a low of 2.41 per cent in April 2022, to 4.58 per cent in October, notably impacting housing affordability. While the rate rises are making owner-occupier mortgage repayments less affordable, investors are less impacted thanks to the tax deductibility of interest on investment loans. How will changes to international borders and migration affect the market? To ease workforce and skill shortages, the permanent migration quota has been increased from 160,000 to 195,000 in 2023, with all additional spaces allocated to skilled work visas. This will likely further decrease vacancy rates and increase rental yields and house sales. The reopening of borders has caused interstate and foreign buying activity to resume strongly which will likely continue to grow throughout 2023. There has been increased foreign investment in commercial property, with remaining popularity in the office and industrial sectors. What’s the latest in BMT news? In BMT news, we reached a milestone of 800,000 schedules completed since opening our doors in 1997 – an accomplishment we attribute to our valued clients and referrer partners. In 2022 we also found clients an average of almost ten thousand dollars in depreciation deductions within the first full financial year. Last August saw BMT’s private equity partners exit, and the executive team acquired one hundred per cent of the company. This allows us to have full control to drive the future direction of the business. Our strategy focuses on customer service and thorough, accurate reporting, always with the aim to maximise claims and make life easy for our clients and corporate partners. Now that we are on the other side of the pandemic and have full control of the business, we will continue to find customers the highest compliant deductions while delivering the outstanding customer service that we are known for. We look forward to seeing what the year will bring. The information in this article is sourced from CoreLogic and the Reserve Bank of Australia. This article is general in nature and should not be taken as advice or a guaranteed outcome.

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Holiday parks generate lucrative depreciation deductions

BMT team — Thu, 08 Dec 2022 04:03:22 +0000

Domestic travel is growing. Comparing the June 2022 quarter to the June 2019 quarter, there was an increase in domestic holiday spending of 60 per cent or $5.2 billion, the biggest increase since before the pandemic. Domestic travel is forecast to return to around its pre-pandemic level in 2022-23, then surpass that previous peak in 2023-24. Part of this growth is holiday park stays. According to figures from accounting firm BDO Australia and the Caravan Industry Association, holiday and caravan park revenue has increased twenty per cent above pre-pandemic levels in the first five months of 2022. Holiday parks are a popular domestic destination for millions of Australians thanks to their variability. With domestic travel picking up, now is the time for holiday park operators to ensure they’re claiming maximised depreciation deductions. Here, we demonstrate what depreciation deductions look like in a holiday park and how applying government incentives can further boost cash flow. Government incentives The Australian Government introduced various temporary incentives and policies to boost economic growth and support businesses throughout the COVID-19 pandemic. These incentives include temporary full expensing, increased asset write-off and backing business investment. One of the most significant was temporary full expensing where eligible businesses can claim an immediate deduction for the business portion of the cost of an asset in the year it is first used or installed ready to use for a taxable purpose. Find more information on the available incentives here. Depreciation deductions in a holiday park Holiday parks attract domestic travellers due to their wide range of facilities and flexibility. They’re family friendly, many are pet friendly, and there are a variety of pricing and accommodation options to suit all budgets. They’re also typically found in stunning locations with offsite attractions close by. All types of holiday parks hold lucrative depreciation deductions in both capital works deductions (Division 43) and plant and equipment depreciation (Division 40). Some commonly found claimable capital works deductions in holiday parks include reception buildings, playgrounds, BBQ shelters, picnic tables, swimming pools, cabins and amenity blocks. Commonly found depreciable plant and equipment items include power units for powered sites, air conditioning units, furniture, blinds, linen, towels, jumping pillows and swimming pool filtration systems. The case study below demonstrates what depreciation deductions look like in a holiday park. Hypothetical case study: Shell Holiday Park ‘Shell Holiday Park’ is located on the South Coast of New South Wales and has a wide range of onsite facilities including cabins, powered and un-powered camping and caravan sites, a large swimming pool, playground, water playground, a modern shower and bathroom block, laundry, BBQ’s, picnic areas and a recreation room. In 2021 Shell Holiday Park was purchased by new owners who completed renovations and upgrades in the same year. The table below demonstrates the depreciation deductions found in Shell Holiday Park. Please note this table does not display every division 40 asset calculated in the total and some have been grouped together. The owners of Shell Holiday Park claimed a total of $10,950,809 in depreciation deductions across the first five years in both divisions, throughout the life of the property they will boost cash flow ever further. Because the owners applied temporary full expensing on the upgrades completed in 2021, they were able to claim the qualifying plant and equipment assets as an immediate deduction resulting in a high first-year depreciation claim. By applying temporary full expensing, the owners of Shell Holiday Park were able to use the improved cash flow to build a kids swimming pool, update cabin furniture expand the picnic facilities for the next season. To claim maximised depreciation deductions, holiday park operators should get in contact with a specialist quantity surveyor to organise a tax depreciation schedule. BMT Tax Depreciation has been specialising in commercial depreciation for over twenty years. The team applies industry-specific legislation to ensure all commercial property owners and tenants claim depreciation to its full potential, while maintaining full Australian Taxation Office compliance. To find out more about how holiday park owners and lessees can claim maximised depreciation deductions call BMT on 1300 728 726 or Request a Quote. Disclaimer: the case study used within this article is hypothetical and based on a specific business entity, location and size, this information should not be used as a quote.

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Benefits of partial year depreciation deductions

BMT team — Sun, 20 Nov 2022 23:00:56 +0000

When property investors are preparing their annual income tax return, it’s important to organise a tax depreciation schedule for any recently purchased properties. Even if you have purchased a property in the lead up to the financial year and only owned it for a short period of time, there are still depreciation benefits. Partial year depreciation deductions can be maximised by your quantity surveyor by applying a pro-rata depreciation calculation, resulting in extra cash for you. In this article we will explore: Partial year depreciation deductions Immediate write-off Low-value pooling Talk to an expert Partial year depreciation deductions Investors can claim pro-rata depreciation deductions for the period their property is rented out or is genuinely available for rent. That is, the property is given broad exposure to potential tenants and considering all the circumstances tenants are reasonably likely to rent the property. This is particularly important for holiday homeowners as the property may only be rented during peak seasons like Christmas and New Year. If you use your holiday property for both private and income-producing purposes, you can only claim a deduction for the period where it is income-producing. Partial year depreciation deductions may also apply to investors who have previously used the property as a primary place of residence. Be sure to speak to your quantity surveyor to ensure you claim correctly. BMT Tax Depreciation use legislative tools to make partial year claims more beneficial to new investment property owners. Methods used in pro-rata depreciation calculations include applying the immediate write-off rule and adding eligible assets to a low-value pool. Immediate write-off An immediate write-off applies to any item within an investment property with a value of less than $300, regardless of how long the property has been owned and rented. As an investor, you’re entitled to write-off the full amount of the asset in the first year. For example, if you purchase a new smoke alarm valued at $50 for your investment property, you can claim 100 per cent of the cost in the year of purchase. Low-value pooling Low-value pooling is a method of depreciating plant and equipment assets which have a value of less than $1,000. Any plant and equipment assets with a value of less than $1,000 can be included in a low-value pool and written off at an accelerated rate to maximise deductions. Item can be depreciated at 18.75 per cent in the first year and 37.5 per cent each year thereafter. This amount can be claimed in full in the relevant financial year regardless of how long the property was held for, even if it was one single day. Two types of depreciable assets can be allocated to a low-value pool: Low cost asset: a depreciable asset that has an opening value of less than $1,000 in the year of acquisition Low value asset: a depreciable asset that has an opening value of greater than $1,000 in the year of acquisition but the value after depreciating over time is now less than $1,000. This will only apply if you’ve previously used the diminishing value method. For example, if you purchase a hot water system worth $1,500 it can be depreciated using the diminishing value method. Once its depreciable value falls beneath $1,000, it will be added to the low value pool as it’s considered a low value asset. On the contrary, if the hot water system cost $900 at the time of purchase it would be automatically added to the pool as a low cost asset. It’s important to note that once an item is placed in a low-value pool, it cannot be taken out. Assets which form part of a group with a total cost exceeding $1,000 can cause confusion for property investors so it’s important to speak to an expert to clarify what can and cannot be claimed in a low-value pool. Talk to an expert To ensure all depreciation deductions are claimed correctly for the period a property is income producing or available for rent, investors should request a tax depreciation schedule. A BMT Tax Depreciation Schedule will outline all qualifying deductions from the date of settlement and include a partial year depreciation claim that is calculated pro-rata based on the time the property is rented.

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The Block 2022 depreciation schedules

BMT team — Thu, 10 Nov 2022 00:58:15 +0000

The Block 2022 was like nothing audiences – or crew – have experienced before. From the charming location and impressive renovations to the jaw-dropping depreciation deductions and unexpected auction outcome, this season has been the most extraordinary yet. Generating a record-winning profit of $1,586,666.666, Omar and Oz have won The Block 2022 selling their property at auction for $5,666,666.666 to serial Block buyer Danny Wallis. Danny Wallis also purchased the following two properties sold on auction day including Tom and Sarah-Jane’s House 1 which sold for $4,100,000.99, generating a profit of only $20,000.99, and Rachel and Ryan’s House 2, which sold for $4,249,000.50 post-auction generating a profit of $169,000.50. The Block 2022 is located in picturesque Gisborne South within the Victorian Macedon Ranges. Only a forty-five-minute drive from Melbourne, Gisborne is known for its sprawling country homesteads, tree-lined streets, comfy cafés and restaurants with beautiful wineries and olive groves. The location hits this year’s theme of ‘tree change’ spot on. The teams were assigned with renovating their properties into homestead-style houses plus host Scott Cam renovated a house of his own. All houses contain five bedrooms, three bathrooms and spacious living and dining areas with luxurious butler’s pantries, walk-in wardrobes and mudrooms. For the first time, contestants were also tasked with planning the landscaping for more than 700 square meters. BMT Tax Depreciation was asked to estimate the depreciation deductions available on this season’s properties on The Block. Below we outline the deductions found and just how advantageous they could be for an investor buyer. Jaw-dropping numbers Because of the substantial renovations completed and brand-new assets installed the houses are brimming with depreciation deductions. The table below demonstrates the depreciation deductions BMT found on The Block 2022. Ankur and Sharon’s house (House 3) generated the highest deductions with a total of $5,840,166, more than $100,000 higher than house two in second place. The other houses don’t fall far behind with an average total of $5,292,597 in depreciation deductions and an average of $203,340 in the first full financial year. There was a total of $31,755,586 in depreciation deductions found across all six houses for the life of the properties. To break this down the total capital works deductions (Division 43) were calculated at $28,911,186 and the plant and equipment (Division 40) deductions totaled $2,844,400. The Block auction which was held on Saturday 5 November was no doubt discouraging for the other two teams, but this isn’t game over for properties that failed to sell on auction day. Nine will “continue to negotiate with interested buyers to sell these homes, which are still on the market”, Scott Cam revealed. These properties still have the potential to fetch well over the reserve. While the auction didn’t go according to expectations, The Block properties hold the greatest deductions than ever before making it an enticing purchase for investors. Bradley Beer, Chief Executive Officer of BMT, said that savvy investors will take these lucrative deductions into account when considering any Block purchases as these deductions have the potential to significantly improve an investor’s cash flow. The houses on The Block undergo extensive renovations including new flooring, new roofing, new shelving and cabinets, new kitchens and bathrooms and even new rooms constructed. These upgrades make for attractive deductions. The houses are essentially stripped down to their structural component and built back up. Substantial renovations boost an investor’s eligibility for depreciation deductions. With over thirty million dollars in depreciation deductions, the houses on The Block are a property investor’s goldmine. They’re filled with brand new assets, have strong tenant appeal, low to no maintenance (as they’re newly renovated) resulting in fewer annual expenses and offer significant depreciation benefits. The appliances on The Block alone generated strong deductions. For instance, Omar and Oz’s kitchen features $250,000 in top-end appliances. Even if the furniture and other assets are removed for future tenants, the fixtures and fittings alone such as light fittings, kitchen and laundry appliances, blinds and curtains and more hold profitable deductions. Claiming depreciation is an essential step to not only optimising cash flow but also building and maintaining a successful property portfolio. This applies to all types of property investors. With over twenty years’ experience BMT Tax Depreciation are the industry’s leading experts in property depreciation. To learn more about the depreciation available in substantially renovated properties or depreciation in general contact BMT on 1300 728 726 or Request a Quote.

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