» business depreciation

Property Market Update 2024

BMT team — Mon, 15 Jan 2024 23:34:44 +0000

2023 was a year filled with more than its fair share of challenges, but Australians are tough and the property market was resilient in the face of multiple interest rate hikes and hesitant investor sentiment. Residential home prices across Australia grew by 7% over the year to November 2023, with dwelling prices in the combined capital cities peaking in May, slowing again towards the end of 2023 and settling at 8.2% growth over the year. In contrast residential property values in regional areas showed slower growth, at a rate of 3.4% over the past year. Interest Rates As expected, interest rates continued to rise and many fixed-term mortgage rate loans came to an end, putting some Australians under mortgage stress. Despite these pressures, residential house prices continued to grow, due to the continued imbalance between housing availability and strong demand. This housing imbalance has also impacted the rental market with national rental increases averaging 8.1% over the past year. Despite these increases in rental values, rental yields have shown much smaller growth rates due to interest rate hikes impacting mortgage repayments. Loan Approvals First time loan approvals have increased by 11.8% over the past year, but investor lending was still strong, comprising of more than a third of total approved loans across Australia in 2023. Rising interest rates have done little to slow down the residential property market outlook in most parts of Australia, with monthly sales volumes trending higher than the five-year average despite rising house prices and tighter lending. This upward trend in residential property prices is forecast to continue well into 2024 due to the housing shortage. Investment in alternative property classes will continue to grow in the year ahead. The return of international students is expected to stimulate the demand for student housing and Build-to-rent investment opportunities. Recovery in tourism will also boost consumer demand and growth in the hotel and short-term accommodation market. In line with this predicted growth, we at BMT have seen 15% growth in tax depreciation schedule orders for hotels and motels, affirming the expansion of this sector. Commercial Property Commercial property investors will remain focused on attracting top tenants who are prepared to pay for prime location and amenities, reinforcing the ‘flight to quality’ trend. BMT Tax Depreciation Schedule orders in the industrial sector have grown by 8% while the embattled office sector has shown a 6% decline in the request for tax depreciation schedules in line with market trends. BMT News Overall, it was a challenging but positive year for BMT. We completed more than 40,000 depreciation schedules in 2023, earning our clients hundreds of millions in tax deductions. In 2024 we will have completed close to 1 million depreciation schedules across Australia; an accomplishment that solidifies our position as the number one choice in tax depreciation. In 2023 the Australian Institute of Quantity Surveyors released a white paper validating our approach to property depreciation, insisting that a site inspection by an expert quantity surveyor remains the most reliable way to maximise the depreciation deductions on an investment property. They have also encouraged our industry to move away from referral fees, a practice that BMT has always avoided. Video link We look forward to another great year of partnering with you at BMT. To maximise the tax depreciations on your investment property Request a quote.

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How to calculate scrapping value in depreciation

BMT team — Sun, 13 Nov 2022 15:07:09 +0000

Are you a business or commercial property owner looking to make the most out of updating your fit-out or your next renovation? The key to making the most out of your spend is claiming a deduction for removed assets, this is called scrapping. 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! In this article we will explore: What is scrapping value and how does it work? How to accurately calculate scrapping value in depreciation Taking advantage of scrapping value with new business incentives Claim scrapping with the depreciation specialist Key points: Scrapping value is the un-deducted value of a depreciable asset. When a business owner or commercial investor disposes of an asset, they can claim an instant deduction for the scrapping value. A tax depreciation schedule is usually required to calculate scrapping value in depreciation. What is scrapping value and how does it work? Scrapping value is essentially the un-claimed or 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 the asset’s 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. The purpose of the initial schedule is to show the original assets so the scrapping value can be calculated once the assets are removed. The second schedule will include any new replaced assets and any existing assets that weren’t removed. Taking advantage of scrapping value with new business incentives Right now is arguably the best time for business owners to take advantage of scrapping. 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 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.

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Temporary full expensing of depreciating assets

BMT team — Wed, 13 Jul 2022 02:28:56 +0000

The temporary full expensing incentive was introduced in the 2020 Federal Budget to help boost the economy. The policy aims to help support investment and jobs, and has made some major changes to how business owners can claim eligible depreciating assets. In this article we will look at: What is temporary full expensing to depreciating assets? Business types and aggregated turnover Key dates to remember Timeline for full expensing for brand-new assets Is the small business pool still available? Start taking advantage of full expensing now What is temporary full expensing of depreciating assets? Temporary full expensing is part of the JobMaker Plan developed to boost economic growth, create jobs, invest in future industries and skills, remove red tape, guarantee essential services, and restore confidence during the COVID-19 pandemic. Under this policy, businesses with an aggregated annual turnover up to $5 billion can deduct the full cost of eligible assets that are acquired and first used by 30 June 2023. Temporary full expensing, is available to 99 per cent of Australian businesses and is ultimately an evolution of the instant asset write-off. On face-value this seems straightforward – a business can buy an asset and claim that expense straight back. However, with different aggregated turnover requirements, previously used assets, and past arrangements such as the instant asset write-off and Backing Business Investment (BBI) incentive, it’s more complex than it seems. Business types and aggregated turnover Before we get into how full expensing, the enhanced instant asset write-off and the BBI all work together, it’s important to understand what businesses can take advantage and how. A business ‘type’ can be based on its aggregated annual turnover. The good news is that all business types can take advantage of temporary full expensing. The Australian Taxation Office define Small Business Enterprises (SBE) as businesses with an aggregated turnover of up to $10 million. For this article, we will call Medium Business Enterprises (MBE) those with an aggregated turnover of up to $50 million, and Large Business Enterprises (LBE) as those with an aggregated turnover between $50 and $500 million. Key dates to remember There are some key dates to be aware of. Understanding the significance of these dates will help businesses understand how full expensing works. 12 March 2020: The government announced the enhanced instant asset write-off and BBI incentive. 6 October 2020: This was budget night, and when the full expensing policy was announced. 30 June 2023: This is the end of the 2022-23 financial year and the last date businesses can take advantage of full expensing. Timeline for full expensing for brand-new assets Since we have covered the basics, let’s dive into how full expensing works for brand-new assets. What happens to brand-new assets purchased from 12 March 2020 and before 7:30pm (AEDT) on 6 October 2020? If the brand-new asset costs less than $150,000 all business types can instantly write it off when it’s installed before 30 June 2021. However, if the asset is above the $150,000 limit, businesses can only depreciate it using accelerated rates under the BBI incentive. What happens to brand-new assets purchased after 7:30pm (AEDT) on 6 October 2020 and before 1 July 2023? This is where the lucrative deductions are supercharged. Any business type, with an aggregated turnover of up to $5 billion, can write-off the full expense of eligible assets instantly. With no threshold or limit to the number of assets a business can claim in a single year, this incentive has the potential to boost cash flow by hundreds of thousands. What happens to second-hand assets purchased from 12 March 2020 and before 7:30pm (AEDT) on 6 October 2020? If the second-hand asset was valued below $150,000 all SBEs, MBEs and LBEs can instantly write it off in that year’s tax return. The only requirement is that it is installed by 30 June 2021. For second-hand assets valued above $150,000, depreciation works based on the business’s aggregated turnover. SBEs can place the asset in their simplified small business pool, while MBEs and LBEs must depreciate the asset based on its effective life. What happens to second-hand assets purchased after 7:30pm (AEDT) on 6 October 2020 and before 1 July 2023? All SBE and MBEs can instantly deduct any eligible second-hand asset in the same financial year through full expensing. LBEs could also instantly deduct the asset if it’s valued at less than $150,000. However, the asset must be purchased on or before 31 December 2020 and installed by 30 June 2021. If the asset’s purchase and installation dates don’t meet this timeframe, it must be depreciated based on its effective life. Is the small business pool still available? Small businesses can still take advantage of the small business pool, which allows SBE’s to group assets and depreciate them at a higher rate. A SBE can now deduct the entire balance of their pool at the end of the financial year while full expensing is available. Start taking advantage of full expensing now Australian businesses can take advantage of temporary full expensing and all other depreciation incentives with a BMT Tax Depreciation Schedule. A BMT report will take all business incentives into account and apply them to qualifying assets when applicable. For over twenty years, BMT has helped businesses across Australia claim back more at tax time. To learn more about BMT and commercial services, call BMT 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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What happens when a business owner’s SMSF owns their premises?

BMT team — Tue, 19 Oct 2021 23:20:38 +0000

A strategy some business owners use to improve business while investing in their own future is to rent their business premises from their self-managed super fund (SMSF). The superannuation industry is highly regulated, so how does this work with all the red-tape? And how does the business owner and SMSF claim tax deductions for this scenario, including depreciation? What is an SMSF? An SMSF is a type of private super fund that can hold up to six members. It has the same purpose as any other super fund – to set the members up for retirement. This type of super fund differs from traditional retail or industry funds as the members are often also trustees. This means members have many responsibilities to ensure their fund is managed in compliance with strict superannuation laws. One of the same; SMSF member and business owner A business owner can be an SMSF member while running their own business separately to the fund. However, this is on the condition that any dealings between the SMSF and the business are done on an arm’s length basis. This means the business and SMSF can’t exploit the system by purchasing and selling assets to each other at a rate that is well below market value. The purchase or sale of a fund asset (e.g. property, shares) must always reflect the true market value of the asset. Any income that is earned as a result of a non-arm’s length transaction on the SMSF’s behalf will face a higher tax rate on the income source. A business owner can use a commercial property that is owned by their SMSF as their business’s premises. The SMSF can even purchase the property from the business and rent it back out to them to improve the business’s capital position – as long as it is done through an arm’s length transaction. Case study – business operating from an SMSF propertyAnthony is a chef and runs his own restaurant. He is also a member of an SMSF.The property he operates his restaurant from is owned by the SMSF he is a member of. He moved his business to this property following its acquisition by the SMSF. Therefore, Anthony rents this property at market rates from his SMSF, giving him security over the lease term for the business while benefiting his future through his SMSF owning the property as it receives a steady income. How does depreciation work in this scenario? Depreciation is the natural process of wear and tear, it happens to most assets including property, vehicles and furniture. An SMSF can claim this depreciation on any eligible property it owns under the fund, while business owners can take advantage of depreciation of the assets they use for business purposes. In this scenario, depreciation is still split into two parts as per the case study below: Case study – continuedAnthony will be able to claim only the fit-out he owns in the property against his business’s taxable income. This includes assets like restaurant furnishings, kitchen equipment and point of sale systems.Meanwhile, the depreciation available on the on the structure of the property and fixed assets owned by the owner (in this case, the SMSF) must be claimed separately and under the SMSF’s tax assessment. This means depreciation deductions will be against the concessional SMSF tax environment of 15 per cent. Businesses and SMSFs must ensure depreciation claims remain compliant Depreciation can shave thousands off a tax bill every year, so these claims are often, and understandably, looked at in detail by the Australian Taxation Office (ATO). Businesses and SMSFs alike can ensure they maintain full compliance and avoid ATO scrutiny with a tax depreciation schedule. This schedule is a document that lasts the lifetime of a property. It outlines all depreciation deductions that are available each financial year and is used by an accountant at tax time. BMT Tax Depreciation specialises in these schedules for all types of property, both residential and commercial, and whether they are owned by individuals or entities. SMSF members and businesses are encouraged to discuss their depreciation option with BMT on 1300 728 726 or the team can contact them once they Request a Quote.

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5 common small business mistakes to avoid

BMT team — Tue, 14 Sep 2021 23:52:11 +0000

The number of small businesses operating in financial year 2020/21 grew, with over 87,000 entering the market despite the uncertainty surrounding COVID-19. To turn a business-idea into a successful reality, here are 5 common small business mistakes that should be avoided. 1. Failing to prepare The phrase ‘prior planning prevents poor performance’ rings true for all types of businesses. A successful business is based on more than just passion for the product or service the business is offering. For a business to run like a well-oiled machine the business owner must be strategic and there must be a comprehensive business plan in place. There’s so much more than a unique business name to consider. Some additional factors include the funds required and financing available, workforce planning, inventory requirements, government obligations and the business’s structure. It’s important to have both a short-term and long-term plan in place before the business takes off. Plan flexibility and adaptability is also needed as businesses don’t always run smoothly and an owner needs to be prepared for the unexpected. 2. Inadequate market research on the competition Unless the business idea is extremely unique and has never been seen before, then there will most likely be competitors in the market. To make things harder, these competitors are often already established in the market and have a loyal following. Market research on this factor is crucial. Failing to do so can be detrimental and prevent market break-through. Once research on the competition is complete, a business can start working out what their key differentiation will be. That is, what they can do differently to the competition to catch customers. Some examples of differentiation tactics include: a competitive and aggressive pricing strategy delivering world-class customer service that goes above and beyond, or include service add-ons that aren’t currently being offered. 3. Entering an oversupplied market This can be prevented by completing the second point of doing the research on the competition. An oversupplied market with numerous competitors can be telling of the business’s likely future success. However, it’s important to remember that just because competitors are there it doesn’t mean that the business won’t be successful. There are several ways a business can be successful in a market with plenty of options, one of which is the differentiation factors discussed in the previous point. Another option could be to see if it’s viable to enter a different location. 4. Failing to budget Budgeting is the most crucial part of a business that is looking to get off the ground. When cash flow is low in the early stages, the budget plan will make or break how and if success will come. There are two things that can go wrong with a budget – overspending or underspending. Overspending can cause funds to run dry and out-pace the cash coming in. While underspending can also be cause negative consequences as it stops the business reaching its full potential. Working through a business budget is different to a personal budget. Engaging an accountant or financial adviser that specialises in business planning can be a sure way to ensure the appropriate budget is in place. It’s also important to be aware of the business incentives currently on offer to many Australian businesses and how they can help boost cash early. 5. Not claiming depreciation and missing out on thousands Depreciation is a tax deduction business owners can claim on the assets they use and own for their business’s operations. To better understand what depreciation can be claimed on, let’s use the example of a café. The café business owner can claim depreciation on all the fit out they ow n and use including the kitchen equipment and machines, furniture, crockery and cutlery, benchtops and point-of-sale equipment. If they also own the building (and not just rent) they will also benefit from claiming depreciation on the building’s structure and fixed assets. Since depreciation is the natural wear and tear of assets over time, no money needs to be spent to claim it. This means it’s a non-cash deduction which can be extremely beneficial to a business’s bottom-line. But on the flip-side, it means it can also be easily missed and go unclaimed. Engaging a specialist quantity surveyor early in the process ensures that depreciation can be claimed from the very beginning. A specialist, such as BMT, will assess the business’s assets and provide an obligation-free estimate of the likely depreciation deductions available. Business owners can contact BMT today and start claiming depreciation now by calling 1300 728 726 or by Requesting a Quote.

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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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What can be depreciated in a business?

BMT team — Sun, 25 Apr 2021 23:59:07 +0000

Despite the turmoil of COVID-19, the 2019-2020 financial year welcomed more Australian business entries than exits. New business owners need to get on the front foot early and do what they can to maximise their cash flows. To do this they should optimise all available tax deductions, including one of the most lucrative deductions – depreciation. In this article, we will cover: What can be depreciated in a business Categories of depreciable business items What happens if the business isn’t the owner of the property Incentives on offer What can be depreciated in a business? Thousands of items can be depreciated in a business. To be eligible, items must fit into the categories of depreciation, and be used wholly or partially for business purposes. Categories of deductible property assets for a business There are only two categories which allow the wear and tear of property and assets, these are capital works deductions and plant and equipment depreciation. An item’s category significantly changes how it is claimed in a business. The first category is capital works deductions. This covers property structure and fixed assets. For example, a business property’s walls, doors, windows, sinks and mezzanines. Depending on the business’s industry, the capital works items will depreciate at a set rate of 2.5 or 4 per cent. The second and arguably more complex category of depreciation is plant and equipment. This group includes the easily removable, freestanding or mechanical assets that a business holds. These may include things like floor coverings, furniture, manufacturing equipment, commercial ovens, vehicles and blinds. No ‘set rate’ of depreciation is available to plant and equipment assets. Each asset has a designated effective life, which informs the depreciation rate. Interestingly for businesses, the rate for the same asset can change across industries. For example, a dishwasher in a child care centre has the effective life of five years, while a dishwasher in a supermarket has an effective life of ten years. What if the business isn’t the owner of the building? When we talk about depreciation, property and assets are discussed concurrently. But what happens if a business doesn’t own the property they operate from? The good news for commercial tenants is that they can claim depreciation on their fit-out and any other assets they own. For example, if a café owner leases their premises but purchases all equipment associated with the business, they can still depreciate these assets just not the property’s main structure. In this scenario, assets that could be depreciable include kitchen appliances, furniture, partitions, cabinetry and floor coverings. Depreciation incentives on offer for businesses Assets can be claimed in a business using a huge incentive called temporary full expensing. Temporary full expensing is available to most businesses with an aggregated turnover of up to $5 billion. Under the policy, business can instantly deduct the full cost of a plant and equipment asset purchased between 7.30pn on 6 October 2020 and 30 June 2023. There’s no limit to the amount of assets a business can claim under the incentive, as long as they and the asset is eligible. To learn more about depreciation and the incentives on offer to all business types, contact BMT today or visit their commercial page for more information.

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What happens to assets when a business closes?

BMT team — Wed, 14 Apr 2021 23:07:52 +0000

The latest Australian Bureau of Statistics report sheds light on the Australian business landscape. During the 2019-20 financial year, the business exit rate was 12.5 per cent, with a total of 291,821 businesses exiting the business community. What happens to the assets these businesses own once they close their doors? The answer largely depends on what the then-business owner does with the asset after they close. In this article, we will cover the three key scenarios: Scenario 1: They sell the asset Scenario 2: They dispose of the asset Scenario 3: They keep the asset Scenario 1: They sell the asset Several factors need to be considered when a business sells an asset. Firstly, any asset that is sold at a profit may trigger a capital gains tax (CGT) liability. CGT is paid if a capital gain is made when an asset that was used to produce income is sold. A number of factors impact the amount of CGT payable, and if the business is classed as a ‘small business entity’ further discounts and exemptions can apply. Scenario 2: They dispose of the asset If the business owner decides to dispose of the asset (i.e., throw it away), they may be able to take advantage of a process called scrapping. Scrapping allows the business to claim an immediate tax deduction of the undeducted depreciable value in the year of disposal. ‘Depreciable value’ is essentially the value of the asset after its natural wear and tear. For example, if a business closed and disposed of benchtops that held the undeducted depreciable value of $3,000, they could claim this as an instant deduction for that financial year. When determining whether the closing business can claim scrapping upon asset disposal, factors include the business’s size, whether it was still operational while the asset was ‘scrapped’ and what depreciation rules the business chose. Whichever the case, a BMT Tax Depreciation Schedule has everything the business owner’s accountant needs to make the appropriate calculation. Scenario 3: They keep the asset A business that closes could keep an asset for several reasons. Maybe they are planning to reopen a new business in the future, or they might want to use it for personal use. This means they won’t be able to scrap the asset as it’s not disposed of, and they also won’t be subjected to any CGT as they aren’t selling the asset. But depending on the businesses model, size and if it was registered for goods and services tax (GST), there may be some GST implications or a GST modification requirement. An accountant may also need to do a balancing adjustment event when the asset has stopped producing an assessable income. This balancing adjustment won’t necessarily work like scrapping, as the asset will still have reasonable market value. The business owner’s financial situation can change the ongoing use of the asset. For example, if they held a loan on the asset, they can no longer claim the interest repayments as tax deductible business expense. To learn more about depreciation and how you can claim scrapped deductions, call BMT on 1300 728 726 or Request a Quote.

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