» Depreciable assets

Claim depreciation on outdoor entertaining assets and save thousands

BMT team — Mon, 21 Jan 2019 05:43:33 +0000

There is no better time of year for outdoor entertaining than summer. The season’s warm afternoons offer perfect conditions for barbecuing with friends or relaxing in the pool. Australians love spending time outdoors, so it’s important to equip your investment property with assets that entice tenants to lease the property long-term and allow them to enjoy the property in summer. While outdoor assets such as swimming pools, patios and outdoor furniture don’t come cheap, property investors can recoup some of the costs for these assets by claiming depreciation. The below infographic shows some of the first full financial year depreciation deductions property investors can claim for common outdoor entertaining assets. Click on the image to expand. The owner of this investment property could claim: $1,400 for the table setting $1,250 for the deck $660 for the barbecue $640 for the pot plants $400 for the cushions $375 for the sails $250 for the bench seat $200 for the fountain, and $91 for the ceiling fan This adds up to an impressive $5,266 in the first full financial year alone, making it much more affordable to own an investment property. Other outdoor assets which attract depreciation deductions include retaining walls, fences, clothes lines, garden sheds, solar lights and watering systems. Investors can claim depreciation on assets for the duration of their individual effective life, as determined by the Australian Taxation Office. Outdoor assets generally have shorter effective lives than indoor assets as they wear out more quickly and therefore need replacing sooner. As an example, indoor furniture can be claimed over 13.33 years whereas outdoor furniture can be claimed over five years. Regularly inspect outdoor assets for wear and tear Seasoned investors are aware of the importance of keeping tenants happy by ensuring items at the property are kept in a good condition. Ensure you regularly inspect outdoor entertaining assets to check for any wear and tear. If your property has recently become vacant, consider making some improvements to your outdoor area to help attract tenants and add value to your investment property. If you plan on removing and replacing old assets, you may be entitled to claim 100 per cent of the unclaimed value as a deduction. Contact BMT Tax Depreciation to calculate your unclaimed deduction on 1300 728 726. To assist your decision of when to replace outdoor entertaining assets, use BMT’s Rate Finder tool to view the individual effective life and depreciation rates for the assets at your investment property.

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What are plant and equipment deductions?

BMT team — Wed, 05 Sep 2018 05:14:18 +0000

In a recent article, we explored capital works deductions. The other category that makes up depreciation is plant and equipment, or division 40. Plant and equipment depreciation refers to the deductions an investor can claim for the wear and tear that occurs to the fixtures and fittings located within a property. They are assets which are considered by the Australian Taxation Office (ATO) to be easily removed from the property. Investors can claim depreciation deductions for more than 6,000 different ATO recognised assets. Some examples include the carpets, blinds, air conditioners, hot water systems, smoke alarms and ceiling fans. Each of the assets is assigned an individual effective life and depreciation rate by which depreciation should be calculated. The depreciation rates and effective lives of all ATO specified plant and equipment assets differ by asset and even by industry. The ATO recognises that plant and equipment items will wear out more quickly than the building itself and likely need replacing sooner. Changes to depreciation rules in 2017 On Wednesday the 15th of November 2017, Parliament passed the Treasury Laws Amendment (Housing Tax Integrity) Bill 2017, which brought about some major changes to plant and equipment depreciation claims. The changes mean that owners of second-hand residential properties (where contracts exchanged after 7:30pm on the 9th of May 2017) are no longer eligible to claim depreciation on existing plant and equipment assets located within their property. However, owners of affected properties can still claim depreciation on the plant and equipment assets they purchase for their property directly. It is important to note that there are still thousands of dollars to be claimed by Australian property investors, as there has been no change to capital works deductions, which typically make up between 85 to 90 per cent of an investor’s total claimable amount. Previously existing depreciation legislation has been grandfathered, meaning investors who already made a purchase prior to this date can continue to claim depreciation deductions as per before. To read more about the new depreciation legislation and how this applies to a range of property investment scenarios, download our comprehensive white paper document Essential facts: 2017 Budget changes and property depreciation. It’s more important than ever to work with a specialist Quantity Surveyor to ensure that all deductions are identified and claimed correctly under the new legislation. Each and every BMT Tax Depreciation Schedule will be tailored to suit an individual’s property investment scenario, ensuring that all deductions are maximised. For further information on any property investment scenario, speak with one of the expert staff at BMT Tax Depreciation on 1300 728 726. .

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Seven things you can’t claim depreciation for

BMT team — Tue, 30 Jan 2018 00:53:46 +0000

On BMT Insider we regularly go into the many different assets and properties you can claim depreciation for. But something new clients in particular might want to know, in reverse, is what they cannot claim depreciation for in their investment property. The good news is that most physical assets you can claim, so the list of what you cannot claim is fortunately not too long. Here are some of the more common things you cannot claim depreciation for in your investment property: 1. Capital works in a home built prior to the qualifying date 2. Plant and equipment assets in a second hand property purchased after 9th of May 2017 3. The property’s land 4. Demolition 5. Soft landscaping expenses 6. Repairs and maintenance 7. Costs associated with acquiring the property 1. Capital works in a home built prior to the qualifying date As a rule, any residential property in which construction commenced prior to the 15th of September 1987 will not qualify for the capital works allowance (Division 43). Investors with properties built prior to this date should still seek the advice of a Quantity Surveyor, as there are often other assets present which they can claim depreciation for. This might include qualifying plant and equipment assets or renovations completed by a previous owner, for example. 2. Plant and equipment assets in a second hand property purchased after 9th of May 2017 Under new legislation outlined in the Treasury Laws Amendment (Housing Tax Integrity) Bill 2017 passed by Parliament on 15th November 2017, investors who exchange contracts on a second-hand residential property after 7:30pm on 9th May 2017 will no longer be able to claim depreciation on previously used plant and equipment assets. Investors can claim deductions on plant and equipment assets they purchase and directly incur the expense for. Investors who purchased prior to this date and those who purchase brand new properties will still be able to claim depreciation as they were previously. To learn more read BMT’s comprehensive White Paper document at bmtqs.com.au/2017-budget-whitepaper 3. The property’s land You cannot claim depreciation for the land your property is situated on, or its value. 4. Demolition While you can scrap assets and claim depreciation for their remaining value, you cannot claim depreciation on the cost of demolition work at your property. 5. Soft landscaping expenses Soft landscaping refers to landscape work that does not involve construction. So while you can claim depreciation for assets such as a retaining wall, which would have undergone construction, you cannot claim depreciation for grass, shrubs or trees, for example. 6. Repairs and maintenance It’s important that investors know the difference between repairs, maintenance and capital works, so they understand what they can and cannot claim depreciation for. Repairs are considered work completed to fix damage or deterioration of a property, such as replacing part of a damaged fence. Maintenance is considered work completed to prevent deterioration to a property, for example oiling a deck. While you cannot claim depreciation for repairs or maintenance, any costs incurred to repair or maintain a rental property can be claimed as an immediate 100 per cent deduction in the year of the expense. This shouldn’t be confused with a capital improvement, which occurs when the condition or value of an item is enhanced beyond its original state at the time of purchase. This must then be classified as either a capital works deduction and depreciated over time or as plant and equipment depreciation. An example of a capital works deductions could be replacing the kitchen cupboards. If any plant and equipment items are removed and replaced, for example an air conditioner, this will also be considered a capital improvement. You can claim depreciation for capital improvements. 7. Costs associated with acquiring the property This may include legal fees, conveyancing, building and pest inspections fees and stamp duty. You cannot claim depreciation for any of these costs. As you can see, when it comes to depreciation there’s not a lot you cannot claim for. For this reason, it’s important to seek the advice of the specialist Quantity Surveyor who can help you uncover the thousands of assets you can claim depreciation for and maximise all the deductions you’re entitled to as an investor.

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Five residential depreciable assets we often discover

BMT team — Wed, 01 Mar 2017 01:54:10 +0000

There are more than 6,000 depreciable plant and equipment assets which owners of income producing residential and commercial properties can claim deductions for. While we provide a comprehensive list on BMT Rate Finder, we thought we’d talk about some of the most common depreciable assets we find within residential properties and some information about these items which helps to explain why it is important to ask a Quantity Surveyor for a depreciation schedule to ensure your deductions are maximised. In this article we will discuss the following common assets: 1/ Air conditioners 2/ Carpets 3/ Garbage bins 4/ Curtains and blinds 5/ Smoke detectors 1/ Air conditioners The recent summer has been a scorcher so it is no surprise that air conditioners are on the list of most common assets we discover in a residential investment property. There are a few different types which a residential property may contain, for example split systems, packaged air conditioning units and room units. These different air conditioning unit types will depreciate at a different rate as the Australian Taxation Office (ATO) provides them each with individual effective lives. Mini split systems up to 20 kilowatts and room units have an effective life of ten years. These will depreciate at a rate of 20 per cent using the diminishing value method. Packaged air conditioning units on the other hand have an effective life of fifteen years and will depreciate at a rate of 13.33 per cent using the diminishing value method. When air conditioning is ducted, it is important to be aware that the ducting, pipes and vents will not be a part of the plant and equipment depreciation, only the unit. This is because ducting, pipes and vents are fixed items and will therefore form part of the capital works deductions which can be claimed at a rate of 2.5 per cent for a maximum of forty years. 2/ Carpets Almost every residential investment property has carpets installed in some of the rooms. These floor coverings are notorious for experiencing wear and tear or damage, particularly in high traffic areas as tenants and even their pets wander around. Some landlords may be wondering when is the right timing to consider replacing existing carpets. The effective life of this item in a residential property, according to the ATO, is ten years. Using the diminishing value method, carpets will depreciate at a rate of 20 per cent. If you decide to replace carpets before the ten year effective life is complete, be aware that any remaining depreciable value can be claimed as scrapping. When a depreciable item is removed and there are remaining deductions available, scrapping allows investors to claim the remaining depreciable value in the year of the items removal. Don’t forget to include a depreciation claim for any newly installed carpet once it has been added. 3/ Garbage bins Yes, even the good old wheelie bin which sits on the curb can be claimed. Given that the sole purpose of this item is to take out the trash, you can be forgiven for not realising that these are depreciable plant and equipment items in investment properties. While the ATO does provide an effective life of ten years for garbage bins, these are relatively inexpensive items. Most properties will have one, but if they need to be purchased all you need to do is pop on down to your local Bunnings and pick one up in the colour variety required. A 240 litre green wheelie bin from Bunnings will set a landlord back a mere $110. Add on a couple of dollars for a sausage sizzle and shopping for your investment property becomes an iconic Australian weekend pastime. The best part of this deal is that because the item has a cost less than $300, owner can claim an immediate write-off in the year the item is purchased. 4/ Curtains and blinds Some investment properties feature blinds, others have curtains and at times there may even be a combination of both used throughout. However, like air conditioners, the effective life of blinds and curtains set by the ATO differ. The effective life of blinds is ten years, while curtains have a six year effective life. Curtains of the shower variety again have a different effective life, one that washes away in just two years. An interesting fact to be aware of when depreciating curtains and blinds is that while these items may form part of a group, the rules state that these items can be claimed individually. Therefore, if all of the items have a total value which exceeds $1,000, but individually each item is valued less than $1,000, the owner is still entitled to add them to a low-value pool and depreciate them at a higher rate. 5/ Smoke detectors Since 1997 powered smoke alarms have been required to be installed in any newly built or renovated property under the Building Code of Australia. Each state has its own laws regarding smoke alarms, however as a general rule, they must meet Australian standards. New smoke alarm requirements in Queensland are a good example of why it is important to check regularly what the requirements are before renting an investment property. As of the 1st of January, Queensland’s new requirements mean that smoke alarms must be of a photoelectric type, be hardwired to the electricity supply, be interconnected to every other smoke alarm, be installed in each bedroom, be installed in hallways servicing bedrooms and installed on the exit path of every storey not containing bedrooms. That’s a lot of smoke alarms needing installation. Smoke alarms are one item which also must be checked to ensure they are in good working order prior to tenancy of any rental property and they are a depreciable asset. Generally, smoke detectors in residential properties will depreciate at a rate of 10 per cent over twenty years. However, again, if they cost less than $300 they are an item which could be written […]

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