» BMT Depreciation Report

The effective life of commercial depreciating assets

BMT team — Fri, 13 May 2022 07:05:20 +0000

Plant and equipment assets are given an ‘effective life’ to work out their decline in value for tax depreciation. In both residential and commercial properties, different plant and equipment assets that perform the same task may have different effective lives. For instance, the effective life of carpet is 8 years while for floating timber flooring it is 15 years. BMT Tax Depreciation often work with the Australian Taxation Office (ATO) setting and adjusting the effective lives of plant and equipment (Division 40) assets. But in commercial properties, the same type of plant and equipment asset can have a different effective life across various industries. For instance, the effective life of carpet in a retail store is 8 years whereas it is 5 years in a café. Here, we outline some of the differences in the effective life of commercial depreciating assets across industries. What is property depreciation? What is an effective life? Air filtration systems Blowers Excavators Hot water systems Water tanks What is property depreciation? Depreciation is a tax deduction claimed for the natural wear and tear of an income-producing building and its assets over time. There are two types of deductions. Capital works deductions (Division 43) are the building’s structure and items that are permanently fixed to the property. Plant and equipment depreciation (Division 40) are items in which are easily removable from the property or are mechanical in nature. Claiming capital works deductions is relatively straightforward. Capital works deductions can be claimed at a constant annual rate based on the historical cost to build the property excluding plant and equipment. Calculating plant and equipment depreciation is more complex. Each asset’s condition, quality and ‘effective life’ determine the allowances available. What is an effective life? The effective life of an asset, as deemed by the Australian Taxation Office, is how long the asset can be used to produce income. Assets that perform similar jobs can have different effective lives, such as the example of carpet and floating floorboards mentioned previously. Where things get more complex is when assets that perform the same job have a different effective life in one commercial industry compared to another. The reason for this is the effective life of a fixture or fitting can be impacted by frequency, intensity level and purpose for which it’s used. Here are some examples: Air filtration systems Air filtration systems have different effective lives in pharmaceutical manufacturing and sewerage services. An air filtration system required to perform in pharmaceutical manufacturing would need to be at a medical grade level to filter the air from the substances used for pharmaceutical production, which results in a shorter effective life. Sewerage and drainage services, while still important, wouldn’t need to filter such strong substances that can cause greater wear and tear on the air filtration system, resulting in a longer effective life. Blowers From this table, blowers have an average effective life of 15-20 years. In the industries where a blower is used more often, the effective life is shorter. In waste treatment and disposal services the effective life is 7.5 years, which could be due to the asset being used significantly more and for heavier or denser substances. Excavators Determining the effective life of an excavator can be difficult due to the various factors that impact the outcome. These factors include more obvious components such as size, industry and weight of the load. But also, less obvious factors such as the type of excavation being undergone can result in different depreciation rates. Similarly, to the previous assets, we can see how in a neighbouring industry of waste remediation and materials recovery there is a five-year effective life for an excavator. This is considerably shorter than other industries. This may also be due to the substances within the load damaging the asset quicker along with weight and frequency of use. Hot water systems There is a two-year difference in the effective lives of hot water systems across industries. Water tanks Water tanks are one asset with very varied effective lives across industries. Many factors can impact this, such as the material of the tank, the size and especially what it’s used for. If a water tank is only used for fire prevention, then it will have a shorter effective life than one used for water supply. This is due to the high level of structure and efficiency required for a fire prevention asset. Temporary full expensing The temporary full expensing policy is available for businesses with an aggravated turnover of less than five billion to claim the full cost of eligible plant and equipment assets purchased between 7.30pm on 6 October 2020 and 30 June 2023. For businesses with an aggregated turnover of less than $50 million, temporary full expensing also applies to the business portion of eligible second-hand depreciating assets. There is no capped limit on the number of assets that can be claimed under full expensing. Assets first used or installed ready for use from 12 March 2020 until 30 June 2021 and purchased by 31 December 2020 are eligible for instant asset write-off, with a threshold of $150, 000 and covers businesses with an aggregated turnover of less than $500 million. The backing business investment measure has also been introduced to support business investment and economic growth by accelerating depreciation deductions, business with an aggregated turnover of less than $500 million are eligible. Assets eligible for this policy must be new, first held on 12 March 2020 until 30 June 2021 and not applied in the temporary full expensing or instant write-off rules. Understanding commercial depreciation can be tricky, but luckily BMT Tax Depreciation know all the ins and outs. To learn more about depreciation across different industries, contact BMT on 1300 728 726 or Request a Quote.

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Have you forgotten to claim depreciation on your rental property?

BMT team — Wed, 22 Dec 2021 21:50:29 +0000

Have you owned a rental property for several years but forgot to claim depreciation? The good news is that yes, you can go back and claim these missed depreciation dollars. What is depreciation? Depreciation is the natural wear and tear of property and assets over time. As a property investor, you can claim your rental property’s depreciation as a tax deduction each year. Depreciation is claimed under two categories. The first is capital works, this is claimable on the property’s structure and fixed assets such as walls, doors, kitchen bench tops and tiles. The second category is plant and equipment, which includes the easily removable and mechanical assets like floor coverings, hot water systems and air-conditioning units. What do you do if you forgot to claim depreciation on rental property? There are several reasons why investors don’t claim depreciation. Sometimes they simply don’t know that the deductions exist, while others don’t believe it’s available to them. Whichever the case, it’s important to always seek advice from a specialist quantity surveyor, such as BMT. They will be able to determine the depreciation available and hence, whether it’s worth back-claiming any missed deductions. Most of the time the answer will be yes. Once BMT gets the green light from you they will make a start on preparing the schedule and organise a physical site inspection. Is it hard to back-claim? It’s not necessarily ‘hard’ to claim back missed dollars, but your accountant will need the documentation to ensure it is done correctly and to substantiate any back-claim that is made. Therefore, a tax depreciation schedule is so important. The schedule itself will show deductions available per year starting from the date of purchase allowing your accountant to amend previous tax returns so you can claim back those missed dollars in depreciation deductions. In some scenarios, your accountant will be able to go back and amend multiple years but this can be difficult to do without a comprehensive tax depreciation schedule that provides the deductions available in previous years in line with legislative requirements. Is there a limited dollar amount that you can claim back? There isn’t a capped amount that you can claim when you’ve forgotten to claim depreciation on your rental property. It all comes down to how much has been missed and what is proven with the tax depreciation schedule. For example, if you missed claiming since the 2019/2020 financial year and each year’s depreciation deduction was approximately $10,000, the entire amounts for each year can be claimed against the corresponding tax return. What happens if you complete a renovation after the schedule is prepared? Renovations can come unexpectedly. Sometimes the need for renovation is due to extensive damage that can’t be fixed with straightforward repairs, while other times it could simply be done to increase the rental return of the property. When a renovation is made, it’s easy to make amendments to existing tax depreciation schedules with BMT. The team will simply get the details of the renovation and update the schedule for a small fee. To learn more about depreciation and what to do when you forget to claim it on your rental property, contact BMT today on 1300 728 726 or Request a Quote.

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What sets a BMT Depreciation Report apart?

BMT team — Thu, 21 Feb 2019 22:45:47 +0000

If you’re in the market for a depreciation schedule or depreciation report for your investment property, you are probably already aware there are a number of Quantity Surveyors competing for your business. To make an educated decision, it’s important to know what sets some schedules and reports apart from others. BMT Tax Depreciation are the property depreciation report market leaders, earning the position through consistent, comprehensive schedules and extensive tax depreciation knowledge. BMT are the largest and most successful tax depreciation company nationwide and are the natural choice for Accountants and other property professionals when it comes to referring their clients. Below are just a few reasons why a BMT Depreciation Report is the best choice for your rental property. BMT schedules and reports last the property’s lifetime BMT’s staff are property depreciation experts Our service is second to none A BMT Depreciation Report is comprehensive BMT has an exclusive online portal MyBMT BMT don’t offer referral fees BMT schedules and reports last the property’s lifetime A BMT Depreciation Report last the full ATO specified forty years. This means that you won’t need to come back for another schedule. Some providers offer schedules with a shorter lifespan such as 10, 15 or even 20 years which will require you to order a second schedule down the track, meaning ordering a BMT report may save you additional expenses in the long run. BMT’s staff are property depreciation experts BMT’s staff receive extensive property depreciation training. Our reputation amongst property professionals and accountants means we are often approached to present educational seminars at events across the country. Furthermore, we don’t outsource and are accountable for every part of the process. Our specialist staff conduct the site inspection, collate the construction costs and develop the comprehensive report. This approach ensures accuracy, which is extremely important in the event of an ATO audit. Our staff are experts on the 2017 depreciation legislation changes and can answer your questions about how the changes directly affect your investment property. Our service is second to none BMT’s client base is made up of many repeat customers due to our exceptional service. Our clients will never talk to a machine when they call. Calls are immediately answered by one of our friendly reception staff who put clients straight through to a depreciation specialist. Before going through with a tax depreciation schedule, our staff will always assess investors’ individual circumstances to determine whether ordering a BMT Depreciation Report will be worthwhile. A BMT Depreciation Report is comprehensive A BMT Tax Depreciation Report covers all tax deductions available over the lifetime of the property, broken down into plant and equipment deductions and capital works allowance. BMT schedules and depreciation reports also outline various methods of claiming depreciation so you can make informed decisions about which method will best suit your investment strategy. BMT Depreciation Reports show partial year calculations and are backdated to the settlement date. This allows you to maximise your claim in the first partial year and in the case where the property was lived in for part of the financial year. BMT can also provide split depreciation reports for multiple owners based on each owner’s percentage of ownership for each asset. This will increase the number of assets which you can claim an immediate write-off or low-value pooling for, meaning claims are accelerated and the investor receives increased deductions in the earlier years of ownership. Find out more about what’s included in our BMT Depreciation Reports and Schedules. BMT has an exclusive online portal MyBMT BMT Tax Depreciation’s complimentary online portal MyBMT helps investors to manage their depreciation and property investment needs in one convenient place. You can request a quote, view and update your report, upload files including photos and receipts and share information with your investment team. You can also use the Research and Insights tool to discover properties recently listed for sale or for rent, to view Census data and stay informed of planning applications and developments and use the PropCalc tool to determine the after-tax cash flow of any prospective or existing property. Accountants can request a quote on behalf of their clients, see how clients’ schedules are progressing and make updates as well as download schedules in CSV or Excel format for their Accounting software. Property managers also benefit from MyBMT and can view free depreciation estimates for their listed properties, request a quote or updates to clients’ schedules. The investor’s latest report can be available through MyBMT. This ensures that their investment team can view the report as the investor continues to make updates to their property. BMT don’t offer referral fees Importantly, BMT do not pay referral fees or kickbacks to those who refer work to us. Some depreciation providers buy referrals from accountants and property professionals by offering a cash reward for jobs. We believe that doing so jeopardises the quality of the service and product. You can rest assured knowing that our referrers recommend BMT not because they are getting paid but because of the exceptional service we provide and the superior quality of our depreciation reports. To request a BMT Depreciation Report, contact 1300 728 726 or request an online quote for a tax depreciation schedule today.

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