» Commercial depreciation

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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Repurposing for demand: Office to residential conversions

BMT team — Fri, 23 Feb 2024 04:51:40 +0000

The evolving work landscape has led to businesses reassessing their office footprint, resulting in a decrease in office leasing. While the demand for A-grade or prime office space remains solid in some areas, older or subprime office buildings are struggling to fill their floors, with research showing a 6% decrease in demand from a year ago and a 24% decrease from pre-pandemic levels in cities globally. Some owners may consider adaptive reuse as a viable option to preserve the building, with popular options including hotel conversions, data centres and the office to residential conversion. Repurposing office buildings into residential units is gaining traction worldwide as a solution to housing shortages. In New York, the Office Adaptive Reuse Task Force is focused on converting outdated office spaces into housing, aiming to create 40,000 apartments from unused office buildings. New data indicates that 250 million square feet of vacant office space in Europe’s top 35 cities can potentially yield 500,000 homes and Australia is in a similar position. NSW office vacancy rates are currently above 13% and a recent study by the Property Council of Australia found that almost 90 Melbourne CBD office buildings are ‘ripe for adaptive reuse’, which could create up to 12,000 new homes in locations where amenity, transport connections and jobs already exist. In Melbourne the superannuation fund Australian Unity recently converted its headquarters into a seniors residential complex and the TNT Apartments towers at Redfern in Sydney were converted from a commercial space to 181 residential apartments. Though the high costs and regulatory challenges have been a deterrent for investors so far, governments worldwide are incentivising such conversions, and policymakers are working to simplify regulatory obstacles, which will hopefully reach Australian shores soon. In addition, the depreciation deductions available on these office to residential conversions will also increase the investor’s cash flow. Below is an estimate of the depreciation deductions that an investor might earn when converting a 1,200 square metre office space in North Sydney to 12 x 100 square metre residential units. Each includes two bedrooms, one bathroom, a kitchen with modern appliances and a connecting lounge area. To maximise the depreciation deductions on your office to residential conversion or to find out more about BMT and the additional services we offer, contact the team on 1300 728 726 or Request a Quote.

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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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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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How commercial site inspections maximise claims

BMT team — Sun, 09 Jul 2023 17:15:00 +0000

Do you own or rent a commercial property? Make sure you know about one of the biggest tax deductions available – depreciation. What is commercial property depreciation? Commercial depreciation is the natural wear and tear of a commercial property and its assets over time. Depreciation reduces a commercial property owner’s taxable income, meaning they pay less tax. Commercial depreciation can be claimed under two key categories: 1. Capital works: A property’s structure and fixed assets are depreciated using capital works deductions. The rate of depreciation varies between 2.5 and 4 per cent depending on the commercial property’s industry type. Some examples of things that are eligible for capital works deduction include walls, doors, windows and sinks. 2. Plant and Equipment: Easily removable fixtures and fittings are depreciated using plant and equipment deductions. Most of these assets are included in the tenant’s business fit-out, rather than the owner. However, BMT still find many that the owner can claim including smoke alarms, hot water systems and air-conditioning units. The only way to benefit from lucrative depreciation deductions is with a tax depreciation schedule. This schedule only needs to be completed once and can be used each financial year. While all properties need a site inspection, the process is more complex for commercial Site inspections are an essential step to claiming maximum depreciation deductions and having the most comprehensive tax depreciation schedule possible. When a site inspector from a specialist quantity surveying firm physically attends the property they know what to look for. They ensure no stone is left unturned and that compliance is completely maintained. During a commercial site inspection, the inspector will attend the property. They will analyse both the interior and exterior of the property and note down any depreciable assets, workmanship and measure the space. Information gathered from the site inspection is used to complete the most comprehensive tax depreciation schedule possible. The inspection also plays an important role in verifying any claim in the event of an audit. When the commercial property owner and occupant are two different parties, claiming depreciation can be difficult. Each party must only claim what they own, however only one site inspection is needed. This is because the site inspector will make note of who owns what on the property, ensuring both the owner and tenant can claim the most. From this, BMT Tax Depreciation can create separate schedules. If the property is leased by a new tenant, is a new schedule required? While commercial properties are often leased long-term, there are instances where the property will be leased by new tenants. When this happens, the owner doesn’t necessarily need a new schedule. If they make improvements between the tenancies, such as installing new air-conditioning, they can get their current schedule updated. When a lease is changed and the previous tenant leaves their fit-out behind, the property owner may be able to claim scrapped deductions on the forgotten assets upon disposal. Scrapping is a process that allows someone to claim the remaining depreciable value of an asset instantly when it’s removed. The new tenant can’t use the previous tenant’s schedule, so will need a tax depreciation schedule for their own fit-out. BMT Tax Depreciation has been the commercial depreciation specialist for over twenty years. Having completed over 800,000 tax depreciation schedules Australia wide, BMT’s experience spans across all commercial industries from hospitality, commercial offices, to warehouses and medical centres. To learn more about how commercial site inspections maximise claims, contact BMT on 1300 728 726 or Request a Quote.

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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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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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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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Discover the tax benefits available to granny flats owners

BMT team — Mon, 26 Sep 2022 02:18:41 +0000

For many years granny flats have been an increasingly popular way to invest in property. Granny flats can boost a property’s value substantially and increase rental yields. Granny flats (also known as secondary dwellings) are self-contained units that have a kitchen or kitchenette, bathroom, bedrooms, a laundry and living area. They’re popular for older family who require ongoing support, as Airbnb’s (more so if the location is in a tourist area), and for people simply wanting to boost their cash flow. Some people are even moving into their granny flat and renting out their main home to maximise earning potential. In this article we explore the benefits of granny flats, each state’s regulations and how depreciation deductions can maximise an investment return. Tax benefits of a granny flat State regulations Maximise investment return with depreciation Tax benefits of a granny flat There are many benefits to granny flats including earning a rental income, quick returns, access to tax benefits, growth in property value, and space for family growth. The cost of constructing a granny flat is cheaper and can yield quicker returns than alternative residential investment properties such as a house or an apartment. The price of constructing a granny flat can be anywhere from $80 000 up to $300 000 plus and construction is usually scheduled between twelve to fourteen weeks from start to final handover. Prices depend on size, fixtures and fittings, the land it’s built on (for example if the land is on a slope construction may cost more) and existing services (if the granny flat is further away from your power and sewerage system it may cost more to connect them). This doesn’t include council or application fees. Some councils require fees and contributions be paid before building which go toward the additional services and infrastructure required as a result of a development. Because a granny flat is income producing there are a variety of tax benefits available including depreciation] and claiming costs such as rates, insurance, interest rates, repairs and maintenance. A typical granny flat can produce a rental income of anywhere from $250 -$500 a week depending on location, size and level of finish. Renting out a granny flat doesn’t only improve cash flow but allows owners to pay off their mortgage quicker. It’s important to note that while there are many benefits to granny flats it doesn’t guarantee the house will grow in value and can potentially reduce the buyer pool when selling as some people don’t want a granny flat on the property. There are also possible capital gain tax implications to consider. State regulations Each state has varying rules to how granny flats can be used, including if they are permitted to produce an income, who can occupy them and where they can be constructed on the property. In New South Wales granny flats can be built without council approval and can be occupied by anyone. The property can’t be smaller than 450 square metres, must maintain a three-metre setback from the rear of the property, a 0.9-metre setback from the side boundaries and can’t exceed a maximum internal space of sixty square metres. They can’t exceed the maximum building height of 8.3 metres, must maintain a three-metre distance from any existing tress over four metres tall, can’t be built over an easement and the property must have residential zoning. In the Australian Capital Territory (ACT) granny flats can be built and occupied by anyone with council approval. The property must be at least 500 square metres, the granny flat can’t be smaller than forty square metres and no larger than ninety square metres, in a residential zone, compliant with the total plot ration for the block and compliant with the Australian Standard AS 4299 Adaptable Housing Class (Class C). They must be a water sensitive urban design, compatible with exterior building materials of existing buildings in the neighborhood and compliant with setbacks. Granny flats in the ACT must have one parking space which cannot be in the ‘front zone’, clear unobstructed pedestrian access, reasonable levels of privacy and private open space for tenants. Under emergency planning changes to help alleviate the housing crisis granny flats in Queensland can now be occupied by anyone. Previously in order to rent out a granny flat to any non immediate family member council approval was required. Without council approval granny flats can’t be larger than eighty square metres and built no further than twenty metres from the main house. Two storey granny flats can’t be taller than 9.5 metres, the rear and side walls must not exceed 7.5 metres, the highest point of the roof cannot be greater than thirty degrees on small lots and can only be built in low or medium density zones. Three storey granny flats can’t be taller than 11.5 metres, the rear and side walls must not exceed 9.5 metres and the maximum point on the top of the roof cannot be greater than thirty degrees. Granny flats must have one parking space (additional to those for the main house) and a separate entrance. In Western Australia only one granny flat can be built on each lot, the lot size needs to be a minimum of 450 square metres (unless your local council states otherwise) and a maximum floor area of seventy square metres (some councils may state up to 100 square metres). Approval from the local council is required if the granny flat will be occupied by a person outside of the household. Once a granny flat is built the land cannot be subdivided (unless your local council states otherwise). The regulations on granny flats in Tasmania is complex as it varies between councils. Developing land for residential purposes requires approval from your local council and granny flats must have a maximum floor size of 60 square metres or no more than thirty per cent of the total area of the main home. All building and plumbing works must comply with the standards of the National Construction Code […]

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7 tax tips for small business owners this financial year

BMT team — Fri, 12 Aug 2022 02:36:00 +0000

The Australian small business sector generates millions of jobs for the local economy. The current environment is challenging for many businesses and it’s more important than ever for owners to maximise their cash flow this financial year. In this article we will explore 7 tax tips for small business owners: What is a small business? Strong record keeping and tracking split expenses Claim pre-paid expenses Don’t forget the Small Business Income Tax Offset Small business capital gains tax concessions Deducting ‘bad’ debt Increase depreciation deductions Key points: A small business is identified as a business with an aggregated annual turnover less than $10 million Strong record keeping and tracking split expenses is key Maximising cash flow is easier than ever with the increased instant asset write-off What is a small business? From a taxation standpoint, a business with an aggregated annual turnover of less than $10 million can be classed as a small business and take advantage of the several tax concessions. A business’s geographical size or number of employees doesn’t determine whether it’s a small business. Strong record keeping and tracking split expenses The number one rule for any small business is to track all expenses incurred, and income earned during the financial year. The Australian Taxation Office (ATO) requires records to be kept for five years. Expenses may include things like replacing assets, advertising costs or business travel. Every small business owner must keep their personal expenses separate to business-related expenses. For example, if a business owner uses a vehicle for both personal and business use, expenses must be apportioned appropriately. Claim pre-paid expenses There are a number of common small business pre-paid expenses that can go beyond the current financial year including insurance premiums, rent, a tax depreciation schedule and memberships. If any small business owner has made any pre-paid expenses, they can claim this expense in the financial year it occurred. Don’t forget the Small Business Income Tax Offset The small business income tax offset offers small businesses a tax offset of up to $1,000 per year. This offset is currently available for unincorporated small businesses with an aggregated turnover of less than $5 million from the 2016-17 financial year and onwards. This can be particularly beneficial for businesses in the start-up phase. Small business owners don’t need to apply for the offset as the ATO will work this out from their tax lodgement Small business capital gains tax concessions When a business sells an active asset and makes a profit, they must pay capital gains tax (CGT) on this capital gain in the same financial year. Small business CGT concessions can significantly, sometimes completely, reduce the CGT a small business is required to pay for an active asset. There are four key concessions available for eligible small businesses: the 15-year exemption, 50 per cent active asset reduction, retirement exemption and small business roll-over. Deducting ‘bad’ debt An unpaid debt to a business is deemed as a ‘bad’ debt. This type of debt can be a tax deduction for the business if it was included in their assessable income in the present or previous income year. There are several conditions that must be met for a debt to qualify as a bad debt. If it does qualify, it can be written off as a tax deduction. Increase depreciation deductions It’s crucial for small business owners to claim depreciation deductions to maximise their cash flow. If a small business owner is a tenant of a property, they shouldn’t dismiss claiming depreciation. Commercial tenants can claim deductions for their own assets and fit-out. With temporary full expensing available until the end of the 2022/23 financial year, it’s never been easier to claim more this tax time. This write-off allows any small business with an aggregated annual turnover of less than ten million dollars to instantly write-off any plant and equipment asset of any value. Some common assets a business could claim as an instant write-off include business vehicles, machinery, new software, point-of-sale devices and fit-out assets such as shelving, flooring and interior design. Other available incentives include the backing business if they have an aggregated turnover of less than $500 million and available in the 2019-20 and 2020-21 income years. Also, the immediate write off of the small business low value pool balance in full under the temporary full expensing rules. A tax depreciation schedule is an essential for unlocking lucrative depreciation deductions. A schedule lasts the lifetime of the property (forty years) and the fee is 100 per cent tax deductible. Consult with a commercial depreciation expert BMT Tax Depreciation has been trusted by commercial property owners and tenants Australia-wide for over 20 years. We have completed tax depreciation schedules for many small businesses across all industries. A BMT report takes all business incentives into account and applies them where applicable. To learn more about claiming depreciation and the commercial tax depreciation services BMT offers, Request a Quote or contact the team on 1300 728 726.

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