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Investing in childcare centres

BMT team — Mon, 11 Sep 2023 05:09:39 +0000

The demand for reliable childcare services continues to surge, making owning and operating childcare centres a strategic move that positions owners at the heart of this growing demand while contributing to essential community support. In contrast to industries that experience fluctuations tied to economic cycles, childcare services offer a more dependable income stream. The enduring need for high-quality childcare results in consistent occupancy rates and reliable cash flows. This inherent stability provides owners with a solid financial foundation, shielding them from the volatility that often characterises other sectors. This article examines the benefits that investing in childcare centres provides to owners, including depreciation deductions and the Small Business Energy Incentive. Unlock financial potential with depreciation A significant financial benefit of investing in childcare centres lies in depreciation deductions. Depreciation can be claimed on both a property’s structure and permanent assets (categorised as capital works deductions) and easily removable or mechanical assets (categorised as plant and equipment depreciation). Examples of capital works in a childcare centre could include things like sinks and basins, flooring and sand pits. Plant and equipment assets would be items like free-standing furniture, kitchen appliances and play equipment. By claiming depreciation, owners can effectively decrease their taxable income, leading to enhanced cash flow and reduced tax liabilities. Childcare centres can yield substantial depreciation deductions, enhancing the financial appeal of these investments. Small Business Energy Incentive The Small Business Energy Incentive offers a pathway to align investment with sustainability goals. Under the Small Business Energy Incentive, businesses with an aggregated turnover of less than $50 million can deduct an additional twenty per cent of the cost of eligible depreciating assets that support electrification and more efficient use of energy. Businesses can qualify for this incentive on a total expenditure of up to $100,000 for which the cost is incurred, between 1 July 2023 and 30 June 2024, with a maximum bonus deduction capped at $20,000. Childcare centres can adopt energy-efficient technologies, accessing incentives that not only reduce operational costs but also contribute to a greener future. This enhances profitability while supporting responsible environmental practices. Instant Asset Write-Off The Instant Asset Write-Off allows small businesses using the simplified depreciation rules to claim an immediate deduction for the business portion of qualifying assets. Under the Instant Asset Write-Off, businesses with an aggregated turnover of less than $10 million can immediately deduct the full cost of qualifying assets costing less than $20,000 that are first used or installed ready for use between 1 July 2023 and 30 June 2024. This is on a per-asset basis, meaning multiple assets can be written off as long as they qualify. Case study: Childcare centre applies available government incentives In August 2023, “Harry’s Childcare Centre” undertook a facility upgrade, allowing the owners to qualify for both the Small Business Energy Incentive and the Instant Asset Write-Off. The upgrade involved the installation of new furniture, equipment, and energy-efficient assets, leading to a substantial reduction in taxable income and enhanced financial returns. BMT illustrates the application of the Instant Asset Write-Off and the Small Business Energy Incentive. Table 1: Application of the Instant Asset Write-Off Table 1 demonstrates the application of the Instant Asset Write-Off and the assets installed. The implementation of the Instant Asset Write-Off provided an immediate deduction of $20,243 for eligible assets. For the purpose of this case study, the assets have been grouped together, however, the Instant Asset Write-Off is applied on an asset-by-asset basis. Table 2: Application of the Small Business Energy Incentive Table 2 illustrates the breakdown of how the Small Business Energy Incentive is applied to energy-efficient assets. Thanks to the twenty per cent bonus, an extra $3,092 was claimed in addition to the initial $15,461, resulting in a total of $18,553 for this incentive. Overall, the owners of Harry’s Childcare Centre were able to claim a total of $38,796 in addition to their annual depreciation claim through the application of the Small Business Energy Incentive and the Instant Asset Write-Off. This allowed them to recoup a portion of the costs associated with the upgrades in the same financial year. For investors seeking diversification and scalability, childcare centres offer a compelling avenue. With scalability as a foundational principle, you can expand your investment portfolio, explore untapped markets, and establish multiple revenue streams. The rising demand for quality childcare services positions your investment for sustainable expansion and long-term prosperity. To gain further insights into how investors can effectively integrate depreciation into their investment strategies, reach out to BMT on 1300 728 726 or Request a Quote.

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Claiming depreciation on retail fit out

BMT team — Fri, 15 Oct 2021 23:10:25 +0000

The retail industry is in state of transformation, especially given the advancements in technology and the introduction of online shopping. Retail stores are having to adjust to new trends in order to stay relevant to the modern-day consumer. As online shopping becomes more prevalent and consumer demands grow, it’s important to ensure your retail space is designed to engage customers and optimise their shopping experience. Fortunately renewing or redesigning your retail fit out doesn’t have to cost you a fortune, particularly if you’re claiming depreciation correctly. In this article we will look at: What is retail fit out? What is depreciation? What is scrapping? How to claim depreciation for your retail fit out What is retail fit out? Retail fit out refers to the assets installed in an income-producing retail property. Examples of common retail assets include carpet, air-conditioning units, firefighting equipment, blinds, shelving and security systems. Property owners and tenants are both entitled to claim depreciation deductions for these assets. When an owner upgrades their property’s fit-out prior to putting it up for lease it has a number of benefits, including higher negotiated lease arrangements and in turn, rent return. What is depreciation? Depreciation is the natural wear and tear that occurs to a building and the assets within it over time. Legislation allows the owners of any income-producing property to claim this wear and tear as a tax deduction. For some commercial properties, depreciation deductions can total to hundreds of thousands of dollars, reducing tax liabilities and boosting cash return. When depreciation is being applied to removable plant and equipment assets like retail fit out, it can become complicated. This is because both the owner and the tenants of the property can claim deductions for the depreciation of items. Commercial tenants are able to claim depreciation for any retail fit out they add to a property once their lease starts. The owner can also simultaneously claim deductions for any plant and equipment items originally contained within the property. Each plant and equipment item should be depreciated based on its individual effective life as set by the Australian Taxation Office. Some assets will also entitle the owner to claim an immediate write-off or to add them to a low-value pool to increase deductions sooner. The rules surrounding who can claim what and when applies to all commercial industries and building types. Including hospitality, manufacturing, healthcare and logistics. It’s also important for building owners and tenants to be aware of the financial benefits of scrapping existing retail fit out as this can significantly increase the deductions available. What is scrapping? Scrapping refers to the removal and disposal of depreciable assets from an income-producing property. When these assets are scrapped, the owners and tenants may be eligible to claim the remaining depreciable value as an immediate tax deduction. Depending on lease conditions, if a tenant vacates a building and does not remove the retail fit out from the building, the owner of the property may still be able to claim the remaining depreciation for these items. However, if a tenant’s lease stipulates that the property must be returned to its original condition at the end of the lease, the tenant can benefit by claiming any remaining depreciation on the items that are removed and scrapped from the property. How to claim depreciation for your retail fit out Given the complexities around scrapping and depreciation for retail fit out, both owners and tenants should contact a specialist Quantity Surveyor to prepare a depreciation schedule. Quantity Surveyors are qualified professionals who specialise in building measurement and estimating the value of construction costs. They use their skills to ascertain the costs of building works on any project. At BMT Tax Depreciation, our qualified Quantity Surveyors can help you uncover every depreciation deduction you’re entitled to. BMT can provide separate depreciation schedules for owners and tenants that outline the deductions available for each party. These deductions can be beneficial in improving cash flow and reducing the annual costs of renting or holding the property. To find out the depreciation deductions available to you, Request A Quote or contact one of our expert staff on 1300 728 726.

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How to evaluate a commercial real estate investment

BMT team — Wed, 24 Feb 2021 00:13:21 +0000

There are additional factors to take into account when evaluating the viability of commercial real estate investment versus residential. On top of the usual considerations, commercial property investors need to explore the macroeconomic elements that will impact the success of their investment and the industry it operates in. With this in mind, have you ever wondered how to evaluate a commercial real estate investment? In this article, we will cover: What is commercial real estate 5 tips to evaluating a commercial real estate investment What is commercial real estate? Let’s start simple. Commercial real estate comes in different forms – from agricultural facilities, retail stores, to office buildings and hospitality venues. Commercial real estate is property used to operate a business. The Australian commercial real estate industry holds a large footprint. According to CoreLogic’s latest data, commercial real estate makes up $1 trillion of Australia’s wealth. How to evaluate a commercial real estate investment Evaluating any type of investment property will include carrying out due dilligence which essentially means crunching the numbers. This includes factors like rental income and yield, demand vs supply, financing requirements, how the purchase will impact your cash flow and much more. These are all extremely relevant when evaluating a commercial real estate investment. You will also need to think outside the box and evaluate factors that will impact the success of the property. If you’re looking to purchase a commercial real estate investment, we have broken down these factors to five parts. 1. Know the property’s history If the property is already established and has been used as an investment in previous years, you’re fortunate to have plenty of information and data points. Go through the property’s history and determine how it performed for the previous owners. Some of this information will be confidential but a good indicator is the percentage of time the property was tenanted. This is important to know in the early stages as the higher the percentage the more likely it is to be a solid investment choice. 2. Research the current property market throughout your evaluation What is the commercial property market doing in the area you are looking to buy? The market can be volatile, and while you’re not expected to predict the future, a baseline knowledge is still essential. This means conducting activities like a year-on-year market analysis, evaluating the increase or decrease of rental rates, looking into overall market trends and projected growth in the industry. You can really drill down in this analysis and note things like if there is a new commercial estate opening up nearby that may take prospective tenants wanting new facilities. 3. Track industry trends Unlike residential property, commercial property is significantly differentiated throughout the industry it operates within. In addition to the property market in general, you need to know this industry like the back of your hand. The industry demand is a determining factor of attracting tenants. For example, the warehouse industry is currently in high demand and it looks like it is just getting bigger with consumer preferences moving online. Recent forecasts have suggested that online sales will grow by $12.8 billion in 2021, which would result in a demand of about one million square metres of warehouse demand due to e-commerce activities alone. Data points such as this are a good reference when evaluating a commercial investment. 4. Identify the tenant market and weigh up with supply vs demand How niche or broad is the property’s tenant market? An office space or hospitality venue are examples of properties that would have a broad tenant market. While a poultry farming facility or medical practice are examples of properties with niche tenant markets. Should you be targeting a broad or niche tenant market? The answer to this isn’t straight forward. What you should be evaluating is how the tenant market’s demand weighs up against property supply. Holding a property that’s in high-demand and not in an over-saturated market should be the goal. Anything else can impact the property’s success and how much power you may have in lease negotiations. 5. Estimating the likely depreciation available Property depreciation is the natural wear and tear of a property and its assets over time. You don’t need to spend any money to claim depreciation, so it’s the only ‘non-cash’ deduction available from the property. Depreciation can often be the difference between a positive and negative cash flow. Therefore, it’s essential to include it as part of your initial evaluation of the property. BMT Tax Deprecation is here to help with your commercial real estate evaluation. The team can provide obligation-free preliminary estimates on all types of commercial properties. To learn more, visit BMT’s commercial page or Request a Quote.

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Understanding new tax ruling 2020/3 and how it changes effective life of assets

BMT team — Tue, 11 Aug 2020 23:17:32 +0000

There is no doubting that depreciation is a complicated area of taxation. What makes it even more complex is that the Australian Taxation Office (ATO) releases tax rulings every financial year that affect the effective life of assets and can include additional industries. In this article we will explore: What is an effective life of an asset? What is a tax ruling? Tax ruling 2020/3 overview Under the microscope: TR2020/3 for general practice medical services assets BMT Tax Depreciation is the commercial specialist What is an effective life of an asset? Before we go into details of the latest tax ruling, it’s important to understand what exactly this ruling impacts. One of the categories of depreciation is plant and equipment. These assets are easily removable or mechanical in nature. Some common commercial examples include partitions, air conditioning units, desks and computers. A plant and equipment asset depreciates at a rate based on its effective life. The effective life and depreciation rate can change across industries and how an asset is used. In practice: Depreciation using an effective life Bill owns a restaurant and purchased a new commercial dishwasher for $8,000.The dishwasher has an effective life of 5 years and diminishing value rate of 25 per cent. This results in Bill receiving a first-year depreciation deduction of $2,000 for the dishwasher. Meanwhile, a dishwasher in a residential investment property has an effective of 8 years, but holds the same diminishing value rate of 25 per cent. What is a tax ruling? A tax ruling is an important part of Australia’s taxation framework. Only the tax commissioner (the ATO) can make tax rulings and they can be either a public, private or oral ruling. A recent ruling, named Taxation Ruling 2020/3 (TR 2020/3) was announced at the beginning of this financial year and is a public ruling. This tax ruling replaces the previous year’s ruling (Tax Ruling 2019/5). You can download the full ruling here. Tax ruling 2020/3 overview In effect from 1 July 2020, there are two key areas that this ruling focuses on: 1. Effective life of depreciating assets TR 2020/3 made some changes to the effective life of several assets across industries. Some of the industries that are often included in these tax rulings include manufacturing, retail trade, mining, and much more. 2. Addition of industries It is important that assets are depreciated correctly across commercial industries. For example, you wouldn’t depreciate carpet in a café at the same rate as carpet in a dentist’s office, as cafés experience higher foot traffic. This means that café carpet depreciates in value much faster. The ATO recognises this and has included a number of new, niche categories in TR2020/3 to better suit some industries, including: Aircraft manufacturing and repair services Childcare services Funeral, crematorium and cemetery services General practice medical services Supermarket and grocery stores. BMT’s rate finder tool makes it easy to find out the effective life and depreciation rate of all types of assets across different industries. Rate finder has been updated with all changes from TR 2020/3, click here to start using rate finder today. In practice: Addition of industriesSally is a childcare operator and runs a small centre for children aged between 0 and 5.In the past, Sally was able to claim depreciation on her business assets, but under a different category such as the broad category of ‘education and training’. While the depreciation deductions she received were beneficial, she felt the effective life of assets weren’t fit-for-purpose. For example, her centre’s toys would depreciate much quicker than the same toys in a middle school, but they still had the same effective life. However, TR 2020/3 introduced a new ‘childcare services’ category. This means very specific assets such as toys, tricycles and strollers that Sally’s business holds can now be depreciated to their respective effective lives. Under the microscope: TR2020/3 for general practice medical services assets An interesting category named ‘general practice medical services’ was included as a new addition in TR2020/3. The new general practice medical services is a sub-category under health care and social assistance. Some sub-categories alongside general practice medical services include hospitals, podiatry services and optometry. The assets that have been included in general practice medical services may have been moved from other areas or added with a new effective life. For example, wheelchairs in hospitals hold an effective life of ten years, while wheelchairs in general practice medical services have an effective life of eight years. BMT Tax Depreciation is the commercial specialist BMT Tax Depreciation has been the commercial depreciation specialist for over twenty years. BMT has completed thousands of tax depreciation schedules across all types of commercial industries including manufacturing, agriculture, medical services and hospitality. BMT apply every applicable tax and depreciation ruling to their comprehensive schedules. To learn more, Request a Quote or contact BMT on 1300 728 726.

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New principles for commercial tenancies to help business sustainability during the COVID-19 pandemic

BMT team — Tue, 28 Apr 2020 23:39:17 +0000

Amid the COVID-19 pandemic, our government has announced a number of stimulus packages and measures to help our community get through this unprecedented time. A mandatory code of conduct (the code) has been announced and makes up part of the hibernation strategy for our economy. It introduces several principles to commercial tenancies that are underpinned by good faith negotiations. If you’re a commercial tenant or landlord, here is what you need to know. Contents: Who is eligible? What are the leasing principles? Principle highlight: Rental reductions Tenant responsibilities Landlord responsibilities How will this work? Who is eligible? The principles outlined in the code are applicable for commercial landlord and tenant agreements, where the tenant is a business with an annual turnover of up to $50 million and is eligible for the JobKeeper program. What are the leasing principles? The principles under the code are not focused on outweighing benefits or making one party more disadvantaged than the other. It has been created to help share the burden and provide realistic options to sustain our businesses and ensure many are able to continue their current tenancies. While emphasis is on tailoring arrangements to suit individual circumstances, the leasing principles provide a form of ground-rules for the discussions between commercial tenants and landlords. Principle highlight: Rental reductions Many commercial tenants are under immense financial distress due to the COVID-19 pandemic. Under the code, those eligible will receive rental reductions. This is how it will work: Landlords must offer proportionate rent reductions through waivers and deferrals, of up to 100 per cent of the ordinary rent payable Waivers must create no less than 50 per cent of the total reduction during the COVID-19 pandemic period Rental deferrals by the tenant must be paid over the balance of the lease term of no less than 24 months. Tenant responsibilities Tenants are equally responsible as landlords to exercise good faith in any negotiations. For any tenant to remain protected under the code, they must remain committed to the terms of their lease, subject to any amendments. Any material failures to do so will result in the tenant losing any protections provided under the code. Landlord responsibilities The principles are designed to facilitate the good faith negotiations between landlords and their tenants and leverage any additional benefits that the landlord may obtain, such as deferrals of their own expenses. Here are the key principles that a landlord must follow as part of the code: A landlord must not terminate leases due to non-payment of rent during the affected COVID-19 period Any reductions in statutory charges or insurance are to be passed on to the tenant through appropriate portions Landlords should seek to share any benefit of their own deferrals of loan repayments, provided by the Australian Bankers Association’s COVID-19 response Where appropriate, landlords should seek to waive recovery of any other expense by the tenant, during the period the tenant isn’t able to trade Landlords mustn’t draw on a tenant’s security for the non-payment of rent during the affected COVID-19 period Landlords must agree to freeze rent increases during the affected COVID-19 period. How will this work? The code will be implemented by state and territory governments via appropriate legislation and regulation. Where a tenant and landlord cannot reach an agreement on leasing arrangements as a direct result of the COVID-19 pandemic, the matter would be referred to applicable resolution processes for binding mediation. It’s important to note that good faith negotiations between commercial landlords and tenants is key for this to work. By coming to realistic and sustainable agreements, both parties will help each other reach the other side of this pandemic.

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Australian boutique hotels provide the perfect getaway

BMT team — Tue, 14 Apr 2020 01:25:04 +0000

Australia is filled with boutique hotels offering one-of-a-kind experiences for you and the family to enjoy. While the current climate is stopping us from visiting such special locations, we can still put them on the top of our list for a time where we can have a relaxing break with our families and support local business. From the tranquil East Coast of Tasmania to headlands boasting some of our most beautiful forests in Queensland, here are five of the most unique and secluded hotels in Australia. 1. White Sand Jervis Bay – NSW 2. Lon Retreat – VIC 3. The Jetty – SA 4. Piermont Retreat – TAS 5. Thala Beach Nature Reserve – QLD Boutique hotels depreciate 1. White Sand Jervis Bay – NSW If you’re looking for a holiday amongst nature’s finest, you should consider the award-winning White Sand Jervis Bay on the NSW South Coast. Boasting architecturally designed villas and a prestigious beach house, you will have plenty of time and space to explore the white sand beaches and enjoy uninterrupted views. White Sand Jervis Bay is the perfect destination for anyone wanting to escape the hustle and bustle of the city and feel rejuvenated. 2. Lon Retreat – VIC Hidden away on a hill by the ocean, Lon retreat features seven luxurious suites in Point Lonsdale on the Bellarine Peninsula. Each suite is individually designed with sweeping views of the natural surroundings. The property where Lon Retreat stands was originally a family farm. The owners opened the doors in 2018 as a home-hotel and continue to be inspired by making the retreat somewhere you can reconnect through offering beautiful experiences and keeping things simple 3. The Jetty – SA Offering luxury beachfront accommodation in Port Willunga, The Jetty is the perfect all-year-round holiday destination, with three separate and uniquely designed apartments. Featuring a truly special experience, your doorstep is just minutes away from Port Willunga beach, while McLaren Vale’s world-class vineyards are also close by. 4. Piermont Retreat – TAS Located in remote East Coast Tasmania, the Piermont Retreat is a peaceful sanctuary amongst rich wildlife. Piermont allows guests to carve their own stay, where they can choose to rest or explore. Time can be spent discovering their unspoilt surroundings or unwinding in the stone cottages enjoying the glimmering bay views. Piermont Retreat has been run by the same family for 25 years and they pride themselves on the exceptional experience they provide for their guests. 5. Thala Beach Nature Reserve – QLD Located in private headland between Cairns and Port Douglas, this deluxe eco accommodation is nestled on the resort’s 145 acre property. You can spend your time dining in the treetops, star gazing and walking among nature and wildlife. With names such as the Coral Sea and Jungle Walk Bungalow, you know you’re in for a very special stay that combines comfort with pristine natural surrounds. Boutique hotels depreciate While boutique hotels are truly one-of-a-kind, there are plenty of depreciation deductions available. Property depreciation is the wear and tear of buildings and assets over time. The Australian Taxation Office (ATO) allows owners of income-producing properties, including boutique hotels, to claim this depreciation as a tax deduction. Find out more about boutique hotel depreciation including a case study of likely depreciation deductions. BMT Tax Depreciation has been the most trusted depreciation specialist for over twenty years. They understand every commercial property is different and ensures every depreciable asset is claimed. Boutique hotels can use depreciation to maximise their cash flow as they continue to provide unique experiences for the community. To learn more about depreciation, contact the expert BMT Team on 1300 728 726.

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Government stimulus package to maximise commercial property cash flow for businesses

BMT team — Fri, 13 Mar 2020 02:15:26 +0000

The Morrison Government has announced a $17.6 billion economic plan in response to the challenges posed by the coronavirus. A media release from the Prime Minister’s office yesterday explained the plan is to keep Australians in jobs, keep businesses in business and support households in the Australian economy. The targeted stimulus has a number of elements focused on helping 3.5 million businesses across the country that employ more than 9.7 million employees, or three in every four workers. In this article, we will cover: Instant asset write-off threshold increase 15-month investment incentive Business cash flow assistance What the stimulus means for business owners Instant asset write-off threshold increase The Government announced $700 million to increase the instant asset write-off threshold from $30,000 to $150,000. This increase has been extended to include businesses with an aggregated annual turnover of up to $500 million. The instant asset write-off increase and expansion is now in place and will be until December 31 2020. As a result, many assets purchased from now until June 30 2020 that would have previously been depreciated over their effective life or in a small business pool, will now be written-off immediately. Here are some examples of assets that business owners will now be able to write-off: Industrial gantry cranes: $120,000 Air-conditioning large office: $100,000 Cool room in pub: $80,000 Farmer tractors: $70,000 Mechanic Spray booth: $50,000 15-month investment incentive $3.2 billion was announced to encourage business investment by introducing a fifteen-month investment incentive set to expire June 30 2021. The incentive will support business investment and economic growth by accelerating depreciation deductions for remaining assets not affected by immediate write-off changes. Businesses with a turnover of up to $500 million will be able to deduct fifty per cent of the asset cost, plus an additional amount of the standard depreciation on the remaining balance, in the year of purchase. Business cash flow assistance In addition to the depreciation and investment incentives, the Government has also announced funding to further support employment and businesses who employ apprentices and trainees. $6.7 billion will be dedicated to boost cash flow for employers by up to $25,000 with a minimum payment of $2,000 for eligible small and medium-sized businesses. This tax-free cash flow boost will support businesses with a turnover up to $50 million that employ staff between 1 January 2020 and 30 June 2020. $1.3 billion will be dedicated to support small businesses and the jobs of their apprentices and trainees. Eligible employers will be able to apply for a wage subsidy of 50 per cent of the apprentice’s and trainee’s wages from 1 January 2020 to 30 September 2020. What the stimulus means for business owners It’s clear that the Government is serious about supporting Australian business through the coronavirus pandemic. This stimulus will allow business owners to further maximise their cash flow with the immediate asset write-off increase and expansion, and by claiming higher depreciation deductions sooner. To ensure they take advantage of the stimulus, business owners and tenants must have a comprehensive tax depreciation schedule. BMT Tax Depreciation has been the business owner’s choice for over the past twenty years. To learn more, Request a Quote or contact our expert team on 1300 728 726.

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Australian real estate hot property for international retailers

BMT team — Sun, 23 Oct 2016 22:19:47 +0000

Australian real estate is currently hot property for international retailers. In the last two to three years we’ve had a massive influx of global brands hit our shores and we can only expect this to continue for the next few years. Some big brands will enter the market for the first time (Marks & Spencer, Debenhams and Banana Republic, for example) while already established names such as Sephora, H&M, Zara Home and Costco will continue to grow their presence with more stores across the nation. According to CBRE, there are 130 brands interested in rolling their stores out to Australia and New Zealand for the first time in the next year, with a large percentage of these being mid-range fashion retailers. While these brands typically aim for prime real estate in Sydney’s Pitt Street Mall or Bourke Street Mall in Melbourne when first entering the market, as time goes on we’re seeing them spread their presence to other capital cities and regional areas, and some even opening secondary stores in additional locations to meet the demand. Here are nine reasons why Australian real estate is hot property for international retailers. Low market penetration In January this year, only thirty nine of the world’s top 250 retailers had operations in Australia. This is a saturation of 16 per cent and therefore the representation of international brands in the Australian retail market is quite low. For international retailers, this low penetration means a lower level of competition and increased returns, and we’re nowhere near the point of being oversaturated with global names anytime soon. According to CBRE, an additional fifty global brands would need to roll out stores in Australia for our market to match the global brand penetration currently seen in China, Hong Kong or Singapore, and we would need an additional ninety brands to match the same penetration as Britain. This shows there’s still plenty of room in our market and retailers are jumping at the opportunity. European and American growth prospects limited for international retailers The European and North American retail markets are quite saturated with global brands, meaning opportunities for expansion there are becoming limited, so they’re looking to our shores as a new market. Australia is also a smaller market in comparison, potentially meaning an easier rollout and the ability to establish a notable presence sooner. Resilient and healthy economy On a global level, our economy is comparatively healthy and relatively stable, and is more sheltered from global happenings, as highlighted by the Global Financial Crisis from which we escaped relatively unscathed. This stability is appealing to international retailers looking for a new market. We love to shop There’s no secret about it – Australians love to shop. Whether it’s online or in store, we have solid spending habits over both platforms. Australians typically also have reasonable disposable incomes, allowing us to partake in this past time. Combine this with a positive level of consumer confidence and it’s no wonder global brands want to be part of our market. Growing tourism Tourism levels in Australia are growing, particularly from Chinese tourists. Currently, 30 per cent of retail industry revenue can be attributed to tourism, so it makes sense that increased tourism equates to increased shopping and increased spending, and more opportunity for big brands looking to expand. A new market for China China currently has nine stores in the top 250 global retailers. Yet despite our close relationship and geographic proximity, none of these brands currently exist on Australian soil. But this is about to change. Alongside Chinese growth in residential and commercial office property investments, we will soon see Chinese retailers enter the retail market in a big way, most notably with online retail giants Alibaba and JD.com. Currently, US-owned retailers dominate the foreign retail market here in Australia, accounting for about half of global brands represented, while French retailers come in second with an estimated 13 per cent share. Strong demand for international products There is a strong demand for global brands from Australian consumers. You only need to look at the lines in apple stores whenever a new iPhone is released or the queues to get into new H&M and Topshop stores when they launch to know they’re in demand. Furthermore, Australians love to travel so many already have a strong exposure and connection to these brands and would love to have them more easily accessible in our own backyard. We’re already buying online Thanks to the rise of online shopping in the last decade, these global brands know without a doubt that we want their products – and that’s because we’re already buying them. And if we’re paying the overseas shipping costs to order online, it’s fair to say we’d support a traditional bricks and mortar store without the additional expense of delivery. And thanks to our activity on their online shopping portals, international retailers already have access to our buying behaviour patterns and valuable demographic information; it’s primary market research that puts them in good stead to enter our market, as they already have an in-depth understanding of it. A growing population Australia has a growing population, and it’s currently growing faster than a lot of other markets. This is particularly true for cities and inner urban areas. And what does more people mean? More disposable income, more goods needed and more shopping – and an attractive market for international retailers looking for long term expansion options.

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