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Transforming spaces: The rise of life science real estate

BMT team — Wed, 17 Apr 2024 05:23:42 +0000

Global interest in the life sciences showed significant increase in recent years. With Australia boasting one of the largest life science sectors in the Southern hemisphere, our local industry witnessed a remarkable 40% growth since 2021, emerging as a highly sought-after destination for investment in life science real estate, which includes private hospitals, medical precincts, innovation districts, laboratories and residential aged care facilities. This $250 billon dollar local industry is home to 2,600 organisations and the continual growth is underpinned by a world-class medical research sector nurtured in internationally respected universities, hospitals, and medical research institutes. The industry is further boosted by significant government support, which includes a research and development tax offset of up to 43.5% and more than A$21.5 billion in support funds for the life sciences, which would include funding for facilities. With an aging population and rising cases of chronic diseases such as heart disease and diabetes, the urgency for advancements in life sciences and healthcare solutions has never been greater, positioning Australia as an enticing hub for investment, development, and the conversion of existing properties into life science real estate. These facilities can include laboratories and research facilities that are furnished with advanced scientific equipment and infrastructure to support research in areas such a genomics, medical discovery and biomedical engineering. Manufacturing and production facilities designed to meet stringent regulatory requirements for the production of pharmaceuticals, biologics, medical devices and other healthcare products are also sought after life science real estate. Creating collaborative spaces like innovation hubs or biotechnology parks that bring together scientists, entrepreneurs, investors and academic institutions to foster innovation, collaboration and knowledge are also excellent examples of rejuvenating existing property into life science real estate. Life science real estate conversion projects can take various forms, depending on the type of property and the specific needs of the life science tenants. Some common examples include: Office buildings: Vacant or underutilised office space can be converted into modern laboratories equipped with specialised equipment, biosafety features, and collaborative workspaces. This transformation often involves significant upgrades to infrastructure, HVAC systems, and safety protocols to meet industry standards. Industrial warehouse spaces: Large industrial buildings or warehouses can be repurposed into biomanufacturing facilities or research labs for biotech and pharmaceutical companies. These projects may require extensive renovations to accommodate regulatory compliant cleanrooms with controlled air quality and regulated humidity for cell culture, fermentation, purification and other bioprocessing operations. Retail and commercial spaces: Former retail or commercial properties may be transformed into incubator spaces, shared labs, or start-up hubs for emerging life science companies. These conversions focus on creating collaborative environments with access to mentorship and shared amenities. Historic buildings: Adaptive reuse of historic buildings or heritage sites can preserve architectural heritage while providing modern laboratories or other life science facilities. Converting existing property into life science real estate requires strict adherence to regulatory standards like building codes, biosafety guidelines, and environmental regulations. Older buildings may need significant upgrades to infrastructure, utilities, and HVAC systems to meet the specialised needs of life science tenants and investing in cutting-edge equipment is vital for operational efficiency and industry compliance. Despite these challenges the life science real estate conversion trend is expected to continue and expand as the demand for innovative research and development spaces grows. Key stakeholders, including real estate developers, investors, life science organisations, and local governments, play a vital role in shaping the future of these conversion projects. These projects not only contribute to the growth and sustainability of the life sciences industry, but also drive economic development, job creation, and technological innovation while exemplifying the spirit of adaptive reuse that will solve the increasing demand for state of the art research and development facilities. Collaboration with experienced professionals including architects, engineers, quantity surveyors and other consultants is crucial for navigating the complexities of life science real estate conversion. Adaptive reuse conversion to life science real estate will hold significant depreciation value. Below is a case study of a substantially renovated warehouse of close to 460sqm that was converted into a life science centre with various office spaces, breakout rooms, a staff kitchen, laboratories and various utility rooms. Table 1. An example a life science real estate conversion from warehouse to research space. *The Depreciation deductions in this table were calculated using the diminishing value method. With significant depreciation benefits available on the conversion of an existing property for adaptive reuse, we recommend contacting a specialist quantity surveyor like BMT Tax Depreciation for further advice or to request a quote on your life science real estate conversion.

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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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Commercial property repairs and maintenance – who’s responsible?

BMT team — Fri, 08 Sep 2023 01:52:46 +0000

Commercial property repairs and maintenance is typically shared between the landlord and the tenant. However, the specific obligations and responsibilities can vary depending on the terms of the lease and the applicable state or territory legislation. In this article, we outline: Definitions of repairs, maintenance and capital improvements Landlord’s responsibilities Tenant’s responsibilities Professional property management Claiming deductions for repairs and maintenance Definitions of repairs, maintenance and capital improvements According to the Australian Taxation Office (ATO), repairs are completed to fix damage or deterioration of a property, such as replacing part of a damaged fence. Maintenance, on the other hand, is completed to prevent damage or deterioration of an asset. For example, re-painting a wall the same colour as it was previously, is classified as maintenance. Any works that improve a property beyond its original state are classed as capital improvements. According to TR 97/23, an ‘improvement ‘provides a greater efficiency of function in the property – usually in some existing function. For instance, extending a building is considered a capital improvement. Landlords are typically responsible for structural repairs, pre-existing issues and common areas while tenants are typically responsible for routine maintenance and tenant-caused damage. The following outlines which party is commonly responsible for specific repairs and maintenance. Landlord’s responsibilities The following is typically the responsibility of the landlord: • Structural repairs: – Ensuring the structural integrity of the property, including the foundation, walls, roof and major systems like plumbing and electrical. • Pre-existing issues: – Addressing pre-existing problems or defects which existed before the tenant occupied the property. • Essential services: – Ensuring essential services such as water, gas, electricity and heating/cooling systems are in working order. • Common areas: – Repairing and maintaining areas that are part of a larger complex or have shared areas. Tenant’s responsibilities The following is typically the responsibility of the tenant. • Routine maintenance: – Day-to-day tasks including changing light bulbs, replacing batteries in smoke alarms and general cleaning. • Tenant-caused damage: – Damages caused beyond natural wear and tear such as holes in walls or broken windows, are the responsibility of the tenant. • Reporting repairs: – Tenants should promptly report any necessary repairs or maintenance issues to the landlord or property manager, depending on their agreement. It’s important to note that these responsibilities can be modified by the terms of the lease agreement, so it’s essential for both parties to review the agreement and understand their respective obligations. Additionally, state or territory-specific tenancy legislation may impose additional requirements or guidelines for repairs and maintenance, so it’s advisable to consult the relevant local authority or seek legal advice for precise information based on your location. Professional property management to avoid disputes Commercial property owners often don’t have the time, expertise, or inclination to handle repairs and maintenance directly, in most scenarios they opt to hire professional property management companies. Property managers play a crucial role in overseeing and coordinating repairs, maintenance, and vendor services on behalf of the property owner. They ensure that routine inspections are conducted, maintenance issues are promptly addressed, and the property remains compliant with relevant regulations. Claiming deductions for repairs and maintenance Fortunately, for commercial property owners and tenants, deductions are available for commercial property repairs and maintenance. Repairs and maintenance are immediately deductible in the year the cost incurred while capital improvements are depreciated over time depending on the effective life of the asset or the construction commencement date and the industry in which the building is used. Claiming deductions for commercial repairs and maintenance allows property owners and tenants to recoup often unavoidable expenses throughout the year. Claiming deductions lowers the taxable income of the landlord and tenant, which in turn, improves cash flow and reduces taxation liabilities. By effectively managing repairs, maintenance, and depreciation, property owners can optimise their investments and achieve long-term success in the commercial real estate market. Commercial property owners and tenants should consult with a quantity surveyor that specialises in depreciation, such as BMT Tax Depreciation, to fully understand the specific regulations and requirements related to claiming depreciation and repairs and maintenance to ensure compliance and maximised deductions. To learn more about the deductions available in commercial property repairs and maintenance, get in touch with BMT on 1300 728 726 or Request a Quote.

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Loss carry back tax offset and depreciation

BMT team — Tue, 27 Sep 2022 00:33:33 +0000

In 2020 the Australian Government developed an Economic Recovery Plan as a response to the effects of COVID-19. The plan was developed to boost economic growth, create jobs, invest in future industries and skills, remove red tape, guarantee essential services and restore confidence in a stronger recovery. An element of the Government’s Economic Recovery Plan for Australia included the JobMaker plan, and part of this plan meant a temporary loss carry back tax offset measure was introduced. The loss carry back incentive allows eligible businesses to apply tax losses against profits in a previous financial year. Initially the loss carry back incentive was supposed to end in FY 21/22 but has been extended, so eligible corporate entities will be allowed to carry back losses as far as the 2018-19 financial year when they lodge their FY 2022-23 tax return. Loss carry back tax offset explained The loss carry back tax offset allows businesses with an aggregated turnover of less than $5 billion to apply tax losses against profits in a previous financial year. Due to the $5 billion turnover threshold most Australian businesses are eligible to apply this offset. This initiative allows eligible businesses to carry back tax losses from FY 2019-20, FY 2020-21, FY 2021-22, FY 2022-23 income years to offset previously taxed profits in FY 2018-19 or later income years. For instance, under the previous ruling if ‘Business A’ made a loss in FY 2020-2021 and didn’t return a profit until FY2022-23, Business A would have had to wait two years to claim back the losses. However, under this new measure Business A can use its FY 2020-2021 loss to amend its tax returns going back to FY 2018-2019, resulting in an immediate reimbursement of tax previously paid. To be eligible for the loss carry back tax offset: 1. the amount carried back doesn’t exceed the earlier taxed profits 2. and that the carry back doesn’t generate a franking account deficit. Thousands of Australian businesses have been impacted by the pandemic and are now recovering, the loss carry back incentive presents these businesses with a unique opportunity to continue recovery without detrimental effect to cash flow. Loss carry back tax offset example The table below demonstrates how ‘Business A’ was able to receive an immediate reimbursement once the loss carry back tax offset was applied. Claim depreciation to maximise loss carry back tax offset Businesses can take greater advantage of the loss carry back tax offset with a tax depreciation schedule. A tax depreciation schedule allows businesses to maximise depreciation deductions while maintaining full compliance with current Australian Taxation Office (ATO) legislation. Depreciation is the natural wear and tear of a property and the assets within it over time. The ATO allows owners of income-producing properties to claim this as a tax deduction. Business A ordered a tax depreciation schedule and claimed the maximised deductions, because they also applied loss carry back tax offset, they were able to offset their historical taxable profit against FY 20/21 when they had a loss and as a result reduced their tax liability further. The loss carry back incentive was intended to interact with temporary full expensing, encouraging new investment which may result in tax losses. Where the choice to carry back tax losses results in a tax refund, this will increase business cash flow. Regardless of if the business owns the building or are tenants, they can benefit from the lucrative depreciation deductions available. Fees for depreciation schedules are 100 per cent tax deductible. BMT Tax Depreciation take all current business incentives into account and apply them to qualifying assets when applicable. Claiming depreciation allows businesses to improve their cash flow and make the most out of loss carry back. To find out how your business can benefit from maximising loss carry back with a tax depreciation schedule call BMT on 1300 728 726 or Request a Quote.

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Office renovation depreciation – case study and tax benefits

BMT team — Tue, 19 Apr 2022 06:54:06 +0000

With ‘working from home’ arrangements more commonplace since the start of the pandemic and social distancing now the norm, many businesses have recently altered their office layouts. Office renovation depreciation has always offered lucrative tax deductions. But since temporary tax depreciation incentives were introduced, office renovation has become even more attractive for the businesses that occupy them. In this post we discuss what’s happened in the office sector since the onset of the pandemic and look at an office renovation depreciation case study. Contents: Demand for office space since the pandemic Office renovation depreciation case study Demand for office space since the pandemic Since early 2020, companies have been faced with the incredible challenge of shifting their office-based employees to working from home arrangements, to adhere to state-mandated COVID-19 rules put in place to protect peoples’ health. Lockdowns and work from home orders lasted for months in some states, resulting in a great deal of office space going unused for prolonged periods. Many people held the expectation that more businesses would continue to employ either a full or hybrid working from home model, leading them to think that ongoing demand for office space would be lower than pre-pandemic. And while there was a sharp drop in demand initially, what is interesting is that demand for office space has rebounded, despite working from home arrangements still being in place for many businesses. Ken Morrison, Chief Executive of Property Council of Australia, said “While aggregate vacancy levels have risen slightly from 11.9 per cent to 12.1 per cent, the driver of this has been new supply of office space, not a drop in demand. The reality is that most CBD businesses continue to see the office as integral to their future, and that is reflected in the increased demand for office space over the past six months.” So, what is driving this demand? It appears that many businesses are not just growing in staff numbers but are needing more space to accommodate for social distancing measures, even in those businesses where employees work remotely for part of the week. While we can’t predict how long this will continue, we can rely upon the lucrative depreciation deductions available on office buildings and fit outs. Depreciation case study ‘Business A’ is a medium-sized business entity. It leases office space occupying a partial floor of a Sydney office tower. The space was originally fitted out in 2018 (prior to the COVID-19 pandemic) and is now going to be expanded to accommodate larger collaborative workspaces, social distancing and future growth in head count. The following table demonstrates the depreciation deductions available for the owner of the property (the landlord) and the business operating from it (Business A, the lessee). These deductions provide a healthy boost to cash flow for both Business A and the landlord. Note the large boost in deductions for Business A in year five, which takes into account the instant asset write-off for some of the new fit out. Some of the larger immediate deductions available to Business A from the Year 5 expansion include $60,000 for computer equipment, $33,000 for floor coverings and $14,000 for desks. Meanwhile, the landlord can continue to claim capital works deductions and plant and equipment depreciation on items such as air conditioning, lighting, switchboards and automatic doors. Tax depreciation schedules are key to claiming the maximum depreciation deductions. A BMT Tax Depreciation Schedule ensures commercial depreciation deductions are claimed to their full potential and compliantly by applying all industry-specific legislation. BMT also adopts current business incentives including the backing business investment and temporary full expensing depending on the business size, to ensure every cent is claimed. BMT Tax Depreciation has optimised its commercial process to ensure both owners and tenants claim the most deductions possible. To learn more about commercial depreciation of offices, call BMT today on 1300 728 726 or Request a Quote.

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What is leasehold improvements depreciation? Your questions, answered

BMT team — Tue, 14 Dec 2021 05:26:02 +0000

Leasehold improvements are an important part of any business operation. But how can business owners maximise the cash return from them? The simple answer is through leasehold improvements depreciation. What are leasehold improvements? Leasehold improvements are the improvements made by a lessee, or tenant, to customise a rental property. This is common in the commercial landscape as a tenant often needs to make changes to the property to best match its business operations. Tenants can claim depreciation on their leasehold improvements over the given asset’s depreciable lifetime. Some common examples of leasehold improvements include updating cabinetry and storage, changing flooring or adding new walls within a building. What aren’t leasehold improvements? Repairs and maintenance are not classed as leasehold improvements. For example, if a business tenant patched a crack in a wall or had their kitchen appliances serviced, they wouldn’t be classed as improvements. Expenses related to repair and maintenance can be claimed as an immediate tax deduction in the same financial year. All the owner needs to do is keep record of the expense and their accountant will factor it into their lodgement come tax time. What is depreciation? Depreciation is the natural wear and tear of property and assets over time. Business owners and commercial investors alike can claim depreciation as a tax deduction each financial year. The best thing about depreciation is that unlike other tax deductions, no additional money needs to be spent to claim it. This is because depreciation is a natural process that can be claimed once the asset starts being used to produce income. Why is it important to claim leasehold improvements depreciation? Failing to claim depreciation on leasehold improvements essentially means throwing money down the drain. The depreciation claimed can make a big impact to the amount of tax the business can claim. Sometimes, this depreciation can reach the tens of thousands of dollars in a single year, resulting in a tax refund rather than a substantial tax bill. How to claim leasehold improvements depreciation? A tax depreciation schedule is necessary to claiming maximum depreciation on any leasehold improvements. This schedule will outline the depreciation of all assets owned by the business, not just the areas where improvements have been made. If the business already has a depreciation schedule, they can simply request an update to the current schedule once an improvement is made. BMT offers this service to all their existing clients at a small fee. What happens if the lessee removes their current fit-out to make leasehold improvements? Commercial leases can span for several years, so it’s only natural for the business to make improvements over time. The good news is that any undeducted depreciable value on removed assets can be claimed as an instant deduction. This is possible through a process called scrapping but it’s essential to have a tax depreciation schedule prepared prior to the removal to claim the scrapped value with full compliance. BMT Tax Depreciation has been specialising in commercial and residential depreciation for over twenty years. The team applies industry-specific legislation to ensure all commercial owners and business claim depreciation to its full potential, while maintaining full Australian Taxation Office compliance. Businesses that are planning on making leasehold improvements can call BMT today on 1300 728 726 or Request a Quote for an obligation-free depreciation estimate of the changes.

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Introducing new public Tax Ruling 2021/3

BMT team — Wed, 25 Aug 2021 06:43:31 +0000

The new financial year welcomed Tax Ruling (TR) 2021/3 to the Australian taxation framework. This new public TR has been in place from 1 July 2021 and relates to the effective life of depreciating assets. Here is what you need to know. What is a public tax ruling and why are they important? Australia’s public tax ruling system allows the Tax Commissioner (the Australian Taxation Office) to introduce binding rules and advice for all Australian taxpayers to follow. Tax rulings are an essential part of the nation’s taxation system and fill the gaps that are left by tax laws in place. Tax rulings can be public or private and TR 2021/3 is an example of a public ruling. This ruling is critical to the depreciation landscape as it is focussed on the effective life of depreciating assets. What does tax ruling 2021/3 relate to? In short, TR 2021/3 addresses the effective life of plant and equipment assets. This particular ruling also introduces rates for assets in the salt harvesting and horse training (racing) industries, which weren’t previously specified. Plant and equipment assets are those that are easily removable or mechanical in nature like furniture, motors and tools. Each plant and equipment asset has a designated effective life set out by this ruling which determines its depreciable rate. New industry in TR 2021/3: Salt harvesting On average, the Australian salt harvesting industry produces approximately 12.2 million tonnes of salt annually, with most of this coming from Western Australia. Previously, there was no allowance for salt harvesting assets in tax rulings, making TR 2021/3 important to the industry. Just some of the assets that have been added in the ‘salt harvesting’ industry class include culverts for conveying seawater/brine/bitterness, tugboats, trucks, port assets and pumps. Assets such as these each have an effective life that’s set to be suitable for the new industry class in TR 2021/3. New industry in TR2021/3: Horse training (racing) The second industry that was introduced in TR 2021/3 was horse training (racing). Many of these assets fell under other categories previously, but some have also been added to appropriately reflect assets and their uses in this industry. For example, a ‘racehorse’ was previously depreciated under sport and recreation services with an effective life of ten years. But with this new industry included, ‘racehorse’ has been split into the different type of trained horses as demonstrated in the table below. Other assets that fall under this category include support assets like horse floats and rugs, portable assets, horse training pools, lead companion ponies and tack room furniture. What does BMT do when a new tax ruling is introduced? BMT have multiple processes in place to guarantee that every BMT Tax Depreciation Schedule is 100 per cent compliant. All changes that are made in a public tax ruling is applied and adopted when preparing a schedule, ensuring that every deduction is captured. To learn more about depreciation and how BMT helps investors claim maximum depreciation deductions while maintaining full compliance, contact the team on 1300 728 726.

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What is a depreciation schedule for a business and how does it boost cash with no extra work?

BMT team — Mon, 02 Aug 2021 04:13:03 +0000

Successful business owners make the most of what is available to them. Through the peaks and troughs of operating a business, owners may at times find themselves relying on tax deductions. Tax deductions are almost always the result of incurred expenses. Depreciation is the only exception, meaning no money needs to be spent to claim it. To take advantage of it, a business needs a depreciation schedule. In this article, we discuss: What is a depreciation schedule for a business? What happens if the business changes location and updates their fit-out? How a business depreciation schedule is different to a residential schedule What is depreciation and how does it boost the cash flow for landlords and tenants who run a business? Depreciation is the natural wear and tear of a property and assets over time. Businesses can claim depreciation as a tax deduction on the active business assets and property they use. What is a depreciation schedule for a business and why do businesses need them? A tax depreciation schedule is critical to claiming the maximum amount of depreciation deductions accurately. A tax depreciation schedule is prepared by a specialist quantity surveyor, and it outlines all depreciation deductions available for the lifetime of the business’s assets. Both capital works and plant and equipment deductions will be outlined in the schedule. Capital works are claimable for anything that is structural or fixed, like a physical building or fixed assets such as door handles and sinks. Plant and equipment deductions can be claimed on easily removable or mechanical assets like vehicles, furniture and tools. Once the schedule is prepared, a business owner can take it to their accountant who will use it each tax time to determine the depreciation deductions available to them. What happens if the business changes location and updates their fit-out? Two key things happen from a depreciation perspective when a business changes location and updates their fit-out: 1. Scrapping: They can ‘scrap’ the fit-out that they disposed of. Scrapping is the taxation process of writing off the residual depreciable value of removed assets and claiming it as an instant deduction. For example, if a business disposed of floor coverings that held a residual depreciable value of $1,000, they could claim it as an instant deduction in the same financial year for the loss incurred after performing a balancing adjustment calculation. But to claim this effectively a tax depreciation schedule must have been prepared sometime before the disposal. 2. New schedule: If the business owner has installed an updated fit-out in their new location, they will need to obtain a fresh tax depreciation schedule. A specialist can prepare this and conduct a site inspection at their new location to ensure the schedule is prepared accurately and depreciation can be claimed to its full potential. How is a tax depreciation schedule for a business different to one for a residential property investor? The two key groups that can claim depreciation are property investors (both commercial and residential) and business owners. This is because their activities meet the requirement of using property and assets to produce income. But it’s important to note that a depreciation schedule is very different for a business than it is for an investor. While the fundamentals are the same, with both parties able to claim deductions for the assets they own at the property, business tax depreciation has further intricacies. Firstly, a business tax depreciation schedule applies industry-specific legislation. This means not only does an asset depreciate differently compared to if it was in a residential house, but depreciation can also change based on the industry it’s located in. For example, freestanding furniture in a retail store holds an effective life of ten years, while freestanding furniture in a pub’s drinking area has an effective life of five years. To make things even more complicated, if the same freestanding furniture (chairs, for instance) was instead located in a pub’s dining area such as the bistro, its effective life varies again to be eight years. Further industry-specific depreciation rules, such as primary production depreciation can be applied to unique industries. For example, primary producers (farmers) can claim special depreciation rules on certain assets used for their operations including fencing, fodder storage, water facilities and horticultural plants. Legislative requirements that apply to residential properties and not businesses also exist. For example, 2017 legislation changes that disallow some second-hand property owners to claim depreciation on previously used plant and equipment assets doesn’t apply to businesses. This means a business owner can claim depreciation on second-hand assets. Businesses also avoid legislation that disallows residential property owners to claim depreciation on capital works construction before 15 September 1987. Instead, businesses have an extra five years and can claim any capital works constructed from 20 July 1982. When preparing a business tax depreciation schedule, BMT will ensure that every government incentive the business is eligible for is anticipated and included when preparing the schedule. This includes temporary full expensing and the backing business incentives. Now that you know what a depreciation schedule is for a business, contact BMT Tax Depreciation on 1300 728 726 or Request a Quote to learn more.

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Business tax deductions to boost cash every financial year

BMT team — Mon, 28 Jun 2021 07:01:32 +0000

The end of financial year serves as a good reminder for claiming tax deductions. Knowing what is and isn’t available as a deduction will set business owners up for success in the new financial year. While some deductions for businesses are similar to property investors, others are quite unique. In this article, we will cover the following business tax deductions: Repairs and maintenance Motor vehicle expenses Business travel Employee wages and super contributions Other operating expenses Depreciation deductions What makes something a business tax deduction? There are many tax deductions out there, but not everything will be eligible. The Australian Taxation Office (ATO) applies three golden rules when determining business tax deduction eligibility. The tax-deductible expense must be for business use, not private. If the expense is partially used for private use, the owner can only claim the portion used for business purposes. The business owner must have records to substantiate the deduction. Key business tax deductions Hundreds of tax deductions are out there to be claimed. Deductions can change depending on the type of business and how it’s set up. Here are six key categories that are applicable for most businesses. 1. Repairs and maintenance The ‘repairs and maintenance’ umbrella is large. It covers expenses associated with the upkeep of the assets needed for business operations. Examples could be painting, maintaining plumbing, replacing damaged parts of assets like broken glass and repairing machinery. Further rules apply to claiming repairs for machinery, tools and property. If the repair is made immediately after acquisition, it can’t be claimed. The ATO’s rationale for this ruling is that the need for the repair is a result of the item’s condition when it was purchased, not the business’s operations. 2. Motor vehicle expenses Motor expenses include fuel, repairs and services, the interest on a motor vehicle loan, insurances and registration. Business owners can also claim the depreciation on a vehicle’s value – but more on this later. 3. Business travel These are the travel expenses outside those spent exclusively on operating a business vehicle. Examples are airfares, public transport expenses, car hire fees and overnight business accommodation. Meals for overnight travel also fall under this category. 4. Employee wages and super contributions Employee wages and salaries are a type of operating expense; therefore they are tax deductible. How they are claimed depends on whether the business is a partnership, trust or company. But generally, to claim them a prerequisite is to comply with pay-as-you-go withholding and reporting obligations for all employee payments. Businesses can also claim a tax deduction on the super contributions they make for their employees. To be eligible, the contributions must be made on time and into a complying super fund or retirement savings account. 5. Other operating expenses The list of other general business operating expenses is endless – these are the everyday expenses related to running a business. Just some examples include utilities, advertising, sponsorships, stationary, insurance premiums, waste removal, legal expenses and the cost of running a commercial website. 6. Depreciation deductions Last but not least is depreciation. Depreciation is the natural wear and tear of property and assets over time. Business owners can claim depreciation as a tax deduction on most assets they own and use for their business, including tools, vehicles, furniture and property. A business’s easily removable and mechanical assets are classified as ‘plant and equipment’ for depreciation purposes. Usually, the yearly depreciation claim is based off the asset’s effective life. However, a policy called temporary full expensing is currently in place until the end of the 2022/23 financial year. This allows businesses to instantly deduct any eligible plant and equipment asset purchased after 7.30pm on 6 October 2020 and before 30 June 2023. Find out more about temporary full expensing here. BMT Tax Depreciation has been working with Australian businesses for over twenty years, helping them achieve the maximum depreciation deductions possible. To learn more about BMT’s commercial services, contact the team on 1300 728 726 or Request a Quote.

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The ‘Amazon effect’ is changing the warehouse market

BMT team — Thu, 20 May 2021 00:21:39 +0000

There’s been a distinct rise in demand for industrial property in recent years, particularly for warehouse storage space. This is due to the so-called ‘Amazon effect’ which has resulted in an increase in online retailers requiring the space to store, pack and send orders. As industrial warehouse demand grows, it’s important for owners or tenants to be aware of the depreciation deductions on offer. You could be missing out on thousands of dollars in tax deductions by not taking advantage of your warehouse depreciation entitlements. Here’s our complete guide to warehouse depreciation. What is depreciation? Warehouse depreciation deductions How to claim warehouse depreciation What is depreciation? Depreciation is the natural wear and tear that occurs to a building and the assets within it over time. The Australian Taxation Office (ATO) allows owners of any income producing properties (including warehouses) and businesses to claim a tax deduction for this wear and tear. Warehouse depreciation deductions Warehouse depreciation deductions can be claimed for the wear and tear of the building structure via a capital works deduction, and for the plant and equipment assets contained within the property. Capital works Also known as building write-off, these deductions are available for the depreciation of the building’s structure and are based on the historical construction costs of the building and any items fixed permanently to the building. Examples include the bricks, windows, doors and walls. When assessing capital works deductions commercial warehouses can fall into two ATO classifications. The first is as a “building intended to be used on completion for non-residential purposes such as a shop or office”. Investors in this category can claim eligible capital works deductions if construction commenced after 19 July 1982 at a rate of 2.5 per cent or 4 per cent, depending on the actual date of construction. The second classification is a “building intended to be used wholly or mainly for industrial activities”. This category is for industrial warehouses used for manufacturing. In this case, investors can claim capital works deduction on the warehouse a rate of 4 per cent per year if it was built after 26 February 1992. But if the building was constructed after 15 September 1987 and before 26 February 1992, this rate changes to 2.5 per cent. Going back even further, a manufacturing warehouse constructed between 21 August 1984 and before 15 September 1987,the rate changes again to 4 per cent. You can visit BMT’s capital works deductions webpage for a reference table showing these dates. Plant and equipment assets Plant and equipment assets refer to items which are mechanical or easily removable and these assets can be claimed by property owners: Warehouse tenants can claim depreciation on any fit-out they add from the starting date of their lease. If a tenant removes items at the end of their tenancy, they may also be able to claim any remaining depreciation for assets that are removed and scrapped when they vacate the warehouse. This can become complicated to work out who is entitled to claim what, as warehouse owners are also entitled to claim depreciation on assets installed once a tenancy has ceased. For this reason, it’s important to contact a quantity surveyor to ensure that each party makes their claim correctly. How to claim warehouse depreciation Property depreciation can make a significant difference to a property owner’s cash flow each financial year so it’s important to organise a tax depreciation schedule. A BMT Tax Depreciation Schedule lasts forty years, considers industry specific legislation, provides a range of depreciation methods and includes a property inspection. Ensure you are maximising the cash return from your investment property or business this financial year and Request a Quote today. People also enjoy reading: What’s happening in the commercial property market Is co-working the future of the workplace? Could solar farms be the nation’s preferred future energy source?

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