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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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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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5 ways to improve commercial property performance

BMT team — Thu, 28 Sep 2023 05:12:21 +0000

Businesses are finding themselves in a position where improving the performance of their commercial property is paramount. Improving the performance of a commercial property can lead to an increase in value, better occupancy rates, and a healthier bottom line. In this article, BMT Tax Depreciation explore how to increase commercial property performance and how claiming depreciation can help businesses recoup costs. 1. Renovate Renovating and completing upgrades is the most effective way to increase commercial property value. Upgrades may include new flooring, painting, fixtures or perhaps a complete rebuild of the building’s structure. Renovating will increase the value of a property and boost rental demand and rental return. Businesses should consider completing smart renovations which appeal to a large cohort of tenants and will deliver a high return on the investment. It’s important to discuss any upgrades with a commercial real estate professional to ensure that the works will increase returns. 2. Improve energy efficiency Improving energy efficiency can save on overhead costs, reduce environmental impacts and attract quality tenants. Switching to energy-efficient lighting, such as LED bulbs, can help reduce energy consumption and costs. Businesses can also install sensors and timers to ensure that lights are turned off when not in use. Other improvements can include insulation, upgrading appliances, solar panels, improving water storage, airtight window sealing and improving material selection. Where possible, renovating buildings to use natural lighting and ventilation, utilising green roofs and walls, and using environmentally friendly materials will significantly improve sustainable practices and energy efficiency. 3. Utilise government depreciation incentives Businesses who own and operate commercial buildings can take advantage of the various incentives introduced by the Australian Government to boost performance. Under the extended Instant Asset Write-Off, businesses with an aggregated turnover of less than $10 million can claim an immediate deduction for new or second-hand assets added to a building costing less than $20,000 on a per-asset basis. Owners can enhance their cash flow by accelerating deductions and seize the opportunity to carry out asset upgrades that might otherwise be unfeasible. 4. Introduce new amenities Introducing new amenities to a commercial property can be an effective way to add value to the property. Installing amenities such as new bathrooms, kitchens, fitness centres, cafés, accessible parking and transportation, an outdoor space and security measures will add value and likely attract high end tenants. 5. Claim depreciation Depreciation is a tax deduction available for the natural wear and tear of an income-producing property and the assets within it. Claiming depreciation allows commercial property owners and tenants to lower potential taxation liabilities while also improving cash flow. Increasing the value of a commercial property requires a multifaceted approach. Businesses can maximise the depreciation deductions they claim by engaging a quantity surveyor to prepare a tax depreciation schedule. Quantity Surveyors, such as BMT Tax Depreciation, are one of the few recognised professionals with the training to identify and accurately calculate construction costs. BMT has streamlined its commercial process to guarantee that both property owners and tenants can claim the highest possible deductions in full compliance with regulations. Additionally, BMT diligently applies relevant government incentives, maximising the benefits available to clients. If you’re considering upgrading a commercial property or don’t yet have a commercial tax depreciation schedule, call BMT on 1300 728 726 or Request a Quote.

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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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Commercial property tax deductions for owners

BMT team — Sun, 30 Jul 2023 16:30:48 +0000

Navigating the world of commercial property investment isn’t always easy. Investors must consider economic factors like population growth and demand to work out if it’s worthwhile investing in a commercial property. As with residential investment, there are many ongoing expenses involved with owning a commercial property which can sometimes deter investors from making the leap into commercial property investment. It is important to be aware of the deductions available to investors which make holding a property much more affordable. Here are some common commercial property tax deductions available to investors. Contents Maintenance and management costs Depreciation Depreciation: capital works Depreciation: plant and equipment Renovations BMT are the commercial depreciation experts Maintenance and management costs According to legislation governed by the Australian Taxation Office (ATO), commercial property owners can claim deductions for related expenses for the period their properties are rented or available for rent. Owners can claim an immediate deduction for any expenses relating to the maintenance or management of their property. This may include things like interest on loan repayments, leasing agent fees, council rates, air conditioning repairs, water leaks, cracked tiling or replacing smoke alarms. Depreciation Depreciation is a lucrative deduction available to owners of income-producing properties. As a building and its contained assets age, they depreciate in value. ATO-governed legislation allows owners of investment properties to claim a tax deduction for this wear and tear called depreciation. Owners can claim under two different categories, capital works or division 43 and plant and equipment or division 40. Depreciation: capital works Capital works is the deduction for the building’s structure and any permanently fixed assets. It is commonly referred to as building write-off and can be claimed at either 2.5 per cent over forty years or 4 per cent over twenty five years depending on the property’s construction commencement date. For more information, read BMT Tax Depreciation’s tax depreciation overview. Commercial properties qualify for capital works deductions if construction started after the 20th of July 1982. Examples of qualifying capital works assets include roofs, bricks, mortar, wiring, walls, windows, flooring and other permanently fixed assets. Depreciation: plant and equipment Owners can also claim for plant and equipment assets they own or those which are left behind by tenants. Plant and equipment refers to assets that can be easily removed from the property and includes items like rangehoods, ovens, carpets and air conditioning. Plant and equipment depreciation is calculated based on each asset’s individual effective life as determined by the ATO. Effective life and depreciation rates for commercial and residential assets can be found on BMT Tax Depreciation’s Rate Finder tool. Renovations Commercial property owners can claim depreciation for renovations on their properties including those completed by previous owners. This includes things which may not be so obvious, like updated plumbing, water-proofing and wiring. For renovations of a structural nature to qualify for capital works deductions, they must have commenced within the qualifying dates set by the ATO. BMT are the commercial depreciation experts To maximise the depreciation claim for your commercial investment property, it’s important to engage specialist Quantity Surveyors such as BMT for a tax depreciation schedule. BMT is the largest and most successful tax depreciation company in Australia with extensive experience in creating comprehensive, ATO-compliant schedules. BMT has prepared tax depreciation schedules for commercial properties ranging from primary production, manufacturing, retail centres, mining, office towers, medical centres, traveller accommodation and many more. Find our more about BMT Tax Depreciation’s extensive experience with our Commercial Capability Statement. If you’re considering commercial property investment, contact BMT on 1300 728 726. Alternatively, if you need a quote for your existing commercial property, request a quote here.

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Temporary full expensing ends 2023

BMT team — Thu, 11 May 2023 06:20:47 +0000

The Australian Government introduced temporary full expensing in 2020 to stimulate business investment and drive economic growth during the pandemic. The incentive was put in place until 30 June 2023, to support the country’s economic recovery from the impacts of COVID-19. Given that temporary full expensing will not be extended past this date, businesses wanting to take advantage of the incentive have until the end of financial year 2022-23 to purchase and install qualifying assets and claim the costs in the same financial year. What is temporary full expensing? Temporary full expensing was developed to encourage businesses to invest in new assets such as new equipment, machinery, and technology. Under the scheme, eligible businesses can claim an immediate deduction for the full cost of qualifying depreciable assets, rather than claiming deductions over several years. Temporary full expensing is essentially a supercharged version of the instant asset write off, originally introduced in 2015, and applies to more businesses and to a broader range of assets. It allows eligible businesses to immediately deduct the full cost of qualifying assets of any value in the year they are first held, and first used or installed ready for use for a taxable purpose. Overview of eligibility Businesses may be eligible for temporary full expensing if they have an aggregated turnover of less than $5 billion or are a tax entity that meets the alternative income test. For the 2020-21, 2021-22 and 2022-23 income years, an eligible entity can claim in its tax return a deduction for the business portion of the cost of: eligible new assets first held, first used or installed ready for use for a taxable purpose between 7.30 pm AEDT on 6 October 2020 and 7:30 pm AEDT on 30 June 2023 eligible second-hand assets where both: – the asset was first held, first used or installed ready for use for a taxable purpose between 7.30 pm AEDT on 6 October 2020 and 30 June 2023 – the eligible entity’s aggregated turnover is less than $50 million improvements incurred between 7.30 pm AEDT on 6 October 2020 and 30 June 2023 to – eligible assets – existing assets that would be eligible assets except that they are held before 7.30pm AEDT on 6 October 2020 eligible assets of small business entities using the simplified depreciation rules and the balance of their small business pool. Capital works (Division 43) deductions are not eligible to be claimed under this incentive. Changes to small business support While temporary full expensing hasn’t been extended, the instant asset write-off will continue to support small businesses. The instant asset write-off allows eligible businesses to claim an immediate deduction for the business portion of the cost of an asset in the year the asset is first used or installed ready for use. The instant asset write-off threshold has been temporarily extended to $20,000 from 1 July 2023 until 30 June 2024. Small businesses with an aggregated turnover of less than $10 million, will be able to 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. The threshold will be applied on a per-asset basis, which means small businesses can instantly write off multiple assets. Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed into the small business simplified pool and depreciated accordingly. The provisions that prevent small businesses from re-entering the simplified depreciation regime for five years if they opt out will continue to be suspended until 30 June 2024. Small businesses with an aggregated turnover of less than $50 million will also have access to a bonus twenty per cent tax deduction up to a maximum of $20,000 ie up to $100,000 of total expenditure for eligible assets supporting electrification and more efficient use of energy, from 1 July 2023 until 30 June 2024 under the newly introduced Small Business Energy Incentive. Further detail on the application of this incentive and the eligible assets will be forthcoming. How businesses can benefit from temporary full expensing until 30 June 2023 Temporary full expensing is seen as a powerful tool to encourage businesses to invest in new equipment, machinery, and technology, as it lowers the cost of investment and provides an immediate tax benefit. Although the incentive is a short-term measure, it has the potential to create long-term economic benefits by increasing productivity and boosting employment. For businesses, upgrading equipment or machinery can increase efficiency and output, which could lead to increased revenue and profitability in the long run. It’s important businesses act fast if they’d like to ensure deductions are immediate as assets must be purchased and installed ready for use by June 30. We take a look at how a business’s cash flow can be affected by applying temporary full expensing and in a second scenario the outcome of a business opting out . Case studies The business used in these scenarios is a medium-sized business entity and completed renovations and upgrades towards the end of 2022. Scenario one: Business applies temporary full expensing A business upgraded various equipment and machinery throughout their office including computer equipment and systems, desk fit-outs, kitchen appliances, photocopiers and printers, telephone systems and office waste and recycling tools. The business was due for upgrades and saw temporary full expensing as the perfect opportunity to do so. The following table demonstrates the five years’ cumulative depreciation deductions following the upgrades. The table also displays the deductions for the scrapped assets in year one. Capital works aren’t affected by the incentive but are included to display accurate total deductions within this scenario. The deductions for plant and equipment assets occurring from years two to five are existing assets still generating deductions which the business retained. The immediate deduction for qualifying assets in year one not only boosted cash flow for the business but also offset a large tax liability. The upgrades allowed […]

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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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PropCalc: The investment property calculator for all investors

BMT team — Tue, 22 Nov 2022 05:11:31 +0000

The first step towards owning an investment property is making sure you’re in the financial position to do so. The costs associated with purchasing and maintaining an investment property aren’t always clear nor is the potential cash flow outcome. BMT Tax Depreciation’s investment property calculator PropCalc was developed to eliminate the guesswork from property investment. PropCalc estimates the likely costs of owning any investment property and models your cash flow, even before a purchase is made. In this article we will explore: What PropCalc does How PropCalc How investors can benefit from PropCalc What PropCalc does PropCalc can help both prospective and existing residential property investors estimate the cash flow position of any investment property. The calculator estimates the after-tax holding costs and property’s gearing level based on the investor’s financial scenario. PropCalc takes property related tax deductions into consideration and allows investors to compare multiple properties side-by-side to see which would be best suited for their financial situation. Users can access PropCalc through MyBMT, a portal for property management featuring schedules and policies, record keeping, PropCalc and a research and insights portal which displays planning applications and census data, providing a better indication of future capital growth and vacancy rates. How PropCalc works PropCalc uses property-specific data to give a realistic impression of cash flow by calculating the difference between rental income and expenses, including tax deductions available for expenses. Simply enter the address of the property and PropCalc will pre-fill with reliable estimated data which can then be adjusted for various scenarios. The calculator will include deposit, mortgage insurance, stamp duty, legal fees, interest, body corporate fees, insurance, council rates, water rates, property management fees, repairs and maintenance estimates and depreciation. Once the information is filled out a report will be displayed with property images and estimated figures including holding costs, gearing level and rental yield. You can also see the holding costs in a weekly, fortnightly, monthly or yearly period. Once the report is complete you can go back and change any figures if the scenario changes. PropCalc generates property reports, allowing you to save and compare multiple properties online and through the app. How can investors benefit from PropCalc? PropCalc gives users the advantage of knowing their likely out of pocket cash flow position prior to purchase. This information can help them explore property buying options and make informed decisions on whether a property is suitable without any costs or commitment. PropCalc is available as an app so that properties can be compared on-the-go at property inspections. After inspecting the property, users can add images and enter in notes to have them included in the report. Or the report can be downloaded as a PDF and taken when inspecting the property. Over 40,000 people are already enjoying the benefits of PropCalc. Join them by adding this to your investment property tool kit. Download the app on Google Play, or the App Store or visit bmtqs.com.au/propcalc today.

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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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