Are you a business or commercial property owner looking to make the most out of updating your fit-out or your next property renovation?
The key to making the most out of your spend is claiming scrapping value. Understanding scrapping value and how it’s calculated can boost your cash flow to its full potential, even after you have thrown items in the bin!
What is scrapping value and how does it work?
First, it’s important to understand that depreciable value is different to market value. Specialist quantity surveyors, such as BMT, hold the skills and qualifications to determine the depreciable value of an asset and construction costs for depreciation purposes.
Scrapping value is essentially the un-deducted depreciable value of an asset. The basic equation of calculating scrapping value is:
Original depreciable value – deducted value to date = scrapping value
For example, if $5,000 was an asset’s original value and at the time of disposal the remaining value was $3,000 (after claiming $2,000 in depreciation), this would be the ‘scrapping value’. The owner could then claim the $3,000 as an instant deduction in the same financial year.
How to accurately calculate scrapping value in depreciation
The scrapping value can be easily calculated by having a tax depreciation schedule prepared by a specialist quantity surveyor.
A specialist will need to prepare a schedule both before and after assets are disposed of. Having the starting depreciable value will ensure the maximum claim is achieved.
The good news is that the cost of a tax depreciation schedule is 100 per cent tax deductible.
Taking advantage of scrapping value with new business incentives
Right now is arguably the best time for business owners to take advantage of scrapping value.
The temporary full expensing policy allows most businesses to instantly deduct any new plant and equipment assets that they purchase. The below scenario shows how this can supercharge first-year deductions.
Kayla owns a retail business and has decided to update her store’s fit-out. She organised a tax depreciation schedule to be prepared prior to the fit-out renovation.
The schedule found that the total scrapping value of the removed fit-out came to $25,000. Her new fit-out plant and equipment assets came to a total of $65,000. Some of the assets included shelfing, tables, clothing racks, change room curtains and carpets.
By combining the scrapping value deduction and full expensing the new assets, Kayla can benefit from a huge first-year deduction of $90,000.
Claim scrapping value with the depreciation specialist
You can ensure you claim the maximum scrapping value available with BMT Tax Depreciation. BMT has helped thousands of investors and business owners claim depreciation through scrapped deductions.
To find out more about BMT and the additional services they offer, contact the team on 1300 728 726 or Request a Quote.