» Plant and equipment assets

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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Claiming depreciation on medical equipment

BMT team — Mon, 16 May 2022 02:01:28 +0000

The healthcare industry has been under immense pressure in recent years. An increase in chronic disease, an ageing population, and the recent emergence of COVID-19 have all resulted in growth in demand for medical services. BMT Tax Depreciation has prepared numerous depreciation schedules for medical centres across Australia. Medical centre operators can benefit from highly advantageous tax deductions that are available to be claimed as depreciation on medical equipment. With the Health Services industry in Australia to have an estimated market size of over $170 billion dollars, it’s crucial that all available depreciation deductions are claimed. What is property depreciation? Claiming depreciation on medical equipment Case study: Depreciation on medical centre What is property depreciation? Depreciation is the natural wear and tear of a building and the assets within it over time. The Australian Taxation Office (ATO) allows owners of income producing properties to claim this depreciation as a tax deduction. There are two types of deductions available to claim. Capital works deductions (Division 43) is the building’s structure and the assets that are permanently fixed to the property. And plant and equipment deductions (Division 40) are assets that are easily removable from the property or are mechanical in nature. Claiming depreciation on medical equipment The definition of a healthcare centre is broad. It can include general practitioners (GPs), dental surgeries, imagery and radiology centres, hospitals and so much more. For the purpose of this article, we will focus on general practitioners. Medical equipment is one of the more costly expenses in opening and operating a GP centre. Some medical equipment commonly found in GP centres include examination beds, defibrillators, ECG machines, medical refrigerators, reception furniture, photocopiers, privacy curtains and telephone systems. These assets all hold lucrative deductions that can be claimed each financial year. Case study: Depreciation on medical centre ‘ABC Medical Centre’ is a private general practice medical centre operating in Melbourne. It has six consulting rooms and provides a variety of medical services. The centre was purchased in 2018 for $2,800,000 and is owner operated. Because this business owns the building as well as occupies it, it is entitled to claim the capital works deductions as well as plant and equipment depreciation. The following table demonstrates the five-year cumulative depreciation deductions claimed by ABC Medical Centre for capital works (Division 43) and plant and equipment (Division 40). This table indicates the top depreciable assets claimed by Business ‘ABC’ over five years. As we can see there are significant deductions available on these assets for ABC Medical Centre, helping to recoup the cost of expensive medical equipment and boost cash flow. Depreciation found on medical equipment alone is a substantial deduction and shouldn’t be missed. Missing these deductions can result in losing thousands of dollars. BMT Tax Depreciation has optimised its commercial process to ensure clients claim the most deductions possible. BMT utilises legislation to maximise depreciation deductions and to ensure compliance and applies various business incentives currently available including temporary full expensing, backing business investment and others. To learn more about depreciation on medical equipment or how to claim, Request a Quote online or contact BMT Tax Depreciation on 1300 728 726. Disclaimer: The information provided in this article is based on medical centre size, date of acquisition, size of business entity etc. This information is not to be used as a quote or guaranteed tax depreciation amount. Contact BMT for a specialised tax depreciation schedule.

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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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Lucrative assets to install when renovating

BMT team — Thu, 29 Aug 2019 01:55:17 +0000

A growing number of investors are choosing to renovate their investment properties each year. Master Builders Australia has forecast homeowners and investors will spend $8.8 billion annually on renovations over the next five years. Renovations can increase rental yields and improve cash flow however there are many important factors to consider before getting started. One of the most crucial aspects to consider is the effective life of depreciating assets. In this article we will look at: The effective life of depreciating assets Effective life of depreciating assets for flooring Effective life of depreciating assets for window covers Important depreciation legislation The effective life of depreciating assets Plant and equipment assets are items which are easily removable from the property such as carpet, hot water systems and blinds. The effective life is used to work out the asset’s decline in value for which a depreciation deduction can be claimed. Each asset also has a rate of depreciation which helps to determine the deductions an investor can claim over the asset’s effective life. Investors can claim depreciation deductions for more than 6,000 different assets recognised by the Australian Taxation Office. With so many assets to choose from, it’s important to understand how variations in effective life can alter the depreciation deductions available. We look at flooring, window covers and lighting to help you choose the most valuable assets when renovating your investment property. Effective life of depreciating assets for flooring Carpet has an effective life of eight years. Using the Diminishing Value (DV) method, a rate of 25 per cent is used. If a landlord installs carpet worth $4,000, they will be eligible to claim $1,000 in depreciation deductions in the first full financial year. However, if they install floating floorboards or tiles of the same value, the available deductions will be $533 and $100 respectively. In this scenario, an investor who installs carpet will be able to claim the highest depreciation deduction, while the investor who installs tiles will be eligible for the least. Effective life of depreciating assets for window covers Blinds have an effective life of ten years and a DV rate of 20 per cent. If a landlord purchases blinds worth $3,000, they will be eligible to claim $600 in depreciation deductions in the first full year. If they install curtains of the same value, the first-year claim would increase to almost $1,000. On the other hand, if the landlord decides to purchase plantation shutters, which have an effective life of forty years and a DV rate of 2.5 per cent, the first year deduction would be just $75. With this in mind, curtains are the most valuable asset from a tax perspective. It’s important to note that blinds and curtains may be eligible for low-value pooling. Low-value pooling is a method of depreciating plant and equipment assets which have a value of less than $1,000. Any plant and equipment assets with a value of less than $1,000 can be included in a low-value pool and written off at an accelerated rate to maximise deductions. Items can be depreciated at 18.75 per cent in the first year and 37.5 per cent each year thereafter. Important depreciation legislation It’s important to note that legislation passed in November 2017 brought about major changes to residential plant and equipment depreciation claims. Under current legislation, owners of second-hand residential properties who exchanged contracts after 7:30pm on 9th May 2017 cannot claim deductions for previously used plant or equipment assets. If an investor lives in their rental property while renovating, any newly installed assets will be classed as previously used. Therefore, the investor is potentially risking their tax benefits. Unless there is good reason, investors who are planning on installing new plant and equipment assets should make these additions after they move out of the property and it has been listed for rent. The 2017 legislation does not affect buyers of brand-new property, residential properties considered to be substantially renovated or commercial properties. With this in mind, brand-new property generally holds the most lucrative value for investors from a tax perspective. Capital works deductions for structural assets such as new walls, kitchen cupboards, toilets and roof tiles are also unaffected by the legislation changes and can still be claimed by owners of income-producing properties. When removing structural assets there may be remaining depreciation deductions available. A process known as scrapping can often be applied, allowing investors to claim these deductions in the year the items are removed. To find out more, contact a specialist quantity surveyor to organise a tax depreciation schedule before starting renovations.

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What you need to know when claiming property depreciation

BMT team — Thu, 16 May 2019 23:15:03 +0000

With tax time fast approaching it’s essential investors understand the importance of property depreciation and its financial benefits. In this article we will explore: What is property depreciation? Why you need a tax depreciation schedule What sets BMT Tax Depreciation Schedules apart Claiming property depreciation What is deductible under capital works allowance? What are plant and equipment assets? The difference between repairs and improvements What is property depreciation? Depreciation is the natural wear and tear that occurs to a building and the assets within it over time. Why you need a tax depreciation schedule Any property which generates income may be eligible for thousands of dollars in depreciation deductions. A BMT Tax Depreciation Schedule ensures investors don’t miss out on the hidden cash flow available for their properties. What sets BMT Tax Depreciation Schedules apart BMT is the largest and most successful tax depreciation company in Australia. During FY 2017/18, we found residential property investors an average first year deduction of almost $9,000 Tax Ruling 97/25 states Quantity Surveyors such as BMT Tax Depreciation are one of the only professions qualified to estimate construction costs for depreciation Our schedules last for the forty-year life of an investment property BMT Tax Depreciation Schedule fees can be claimed in your tax return. Claiming property depreciation A BMT Tax Depreciation Schedule includes a detailed outline of two major components – capital works deductions (division 43) and plant and equipment assets (division 40) Capital works allowance refers to the tax deductions for the building’s structure and items considered to be permanently fixed to the property. Plant and equipment assets refer to items which can be easily removed from the property. What is deductible under capital works allowance? Capital works allowance or ‘building write-off’ is a deduction available for the structure of the building and items such as sinks, baths, built-in kitchen cupboards, clothes lines and doors Generally, residential properties in which construction commenced after 15th September 1987 can claim capital works deductions at 2.5 per cent for forty years Commercial properties in which construction commenced after 20th July 1982 are also eligible, though the deductions will vary based on the type, age and historical construction cost of the property. What are plant and equipment assets? Plant and equipment assets refer to items that can be easily removed from the property or are mechanical in nature such as hot water systems, ovens, carpet and blinds Deductions for plant and equipment assets are based on the condition and quality of each individual asset Under current legislation, owners of second-hand residential properties who exchanged contracts after 7:30pm on 9th May 2017 cannot claim deductions for previously used plant or equipment assets. Owners are still eligible to claim for any brand-new plant or equipment assets they add to the property It’s important to note that investors who purchase brand-new residential and substantially renovated properties, commercial real estate or add new plant and equipment assets to a second-hand residential property can still claim substantial depreciation deductions. Visit BMT to enquire about the possible depreciation deductions available on a current or potential investment property. The difference between repairs and improvements Deductible repair: returning items or property to their original state to retain their value. Repairs attract an immediate 100 per cent deduction in the year of expense Improvement: improving the condition of an item or property beyond that of when it was purchased. Improvements are capital in nature and as such, must be depreciated over time. For a free assessment of likely depreciation deductions, contact BMT Tax Depreciation today on 1300 728 726.

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What can I claim as a commercial tenant?

BMT team — Mon, 18 Feb 2019 05:33:31 +0000

Commercial property attracts substantial tax deductions. We recently looked at the depreciation deductions available to commercial property owners, but what can you claim as a tenant in a commercial property? In a commercial property, tax deductions are available for the wear and tear that occurs to a building’s structure and contained assets. The claim is broken down into two categories, capital works and plant and equipment. Capital works refers to the deduction for the building’s structure and any permanently fixed assets and includes things such as roofs, bricks, mortar, windows and wiring. Plant and equipment refers to any assets deemed by the Australian Taxation Office (ATO) as easily removable from the property or those that are mechanical in nature. This includes items such as carpets, air conditioning, ovens or lights. In this article we will look at: Who can claim what? Why claim depreciation? Who can claim what? While owners can claim depreciation for the building’s structure and any assets they own within the property, tenants are entitled to claim deductions for assets they purchase and install during a fit-out. Some common assets tenants can claim include flooring, desks, blinds or shelving. There is also a broad range of industry-specific assets. To search the full list of assets, visit BMT Rate Finder. If lease conditions state a tenant’s property must be returned to its original condition when their lease expires, tenants may have to remove and dispose of assets which have remaining depreciable value. In these circumstances, tenants can write-off these assets as an immediate tax deduction in the year the assets are removed. It is important to contact a specialist Quantity Surveyor to ensure every possible dollar is captured and no depreciable value goes unclaimed. Why claim depreciation? For business owners leasing their premises, claiming tax depreciation can make a significant difference to cash flow, meaning more flexibility when it comes to purchasing stock or undertaking any much-needed renovations. Commercial tenants should contact professional Quantity Surveyors to obtain an ATO compliant tax depreciation schedule to maximise their claim. BMT Tax Depreciation are the commercial property specialists, with expertise across various industries including primary production, mining, manufacturing, office towers, shopping centres and more. For more information on commercial property depreciation, read our Commercial Capability Statement or contact the expert team at BMT Tax Depreciation on 1300 728 726.

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How recent changes to depreciation legislation will impact investors

BMT team — Wed, 06 Dec 2017 04:03:29 +0000

On Tuesday the 9th of May 2017 the government proposed changes to the depreciation of plant and equipment assets in the federal budget. These proposed changes were passed by the Senate on the 15th of November 2017. Shortly after these changes were proposed and following their legislation, a number of property investors contacted BMT Tax Depreciation to discuss how they might be affected. Understandably so, as the last major changes to depreciation legislation were made by the government in the mid 1980’s. The main concerns investors had were about the impact the changes would have on their existing arrangements, future purchases and more widely on the property market. The good news for investors is that properties purchased prior to 7:30pm on the 9th of May 2017 are unaffected, as the previously existing depreciation legislation has been grandfathered. This means that any investor who exchanged contracts prior to this date can continue to claim depreciation deductions as per before. The changes outlined in legislation section two of Treasury Laws Amendment (Housing Tax Integrity) Bill 2017 remove a subsequent owner’s ability to claim a depreciation deduction for previously used plant and equipment assets (the easily removable or mechanical fixtures and fittings) in properties which exchanged contracts after the 9th of May 2017. The legislation also confirms that the proposed changes will only apply to second-hand residential properties. Any investor who purchases a brand new property can continue to claim depreciation for plant and equipment as normal. The changes won’t affect an investor’s ability to claim the capital works component (deductions available for the wear and tear of the building structure and fixed items). Depreciation of plant and equipment for non-residential/commercial properties is also unaffected. The legislation also states that amendments to deductions for plant and equipment assets held in residential properties will not affect those carrying on a business, corporate tax entities, superannuation plans (other than Self-Managed Super Funds) and those who hold a property in a large unit trust. Properties which have been lived in and turned into an investment property by their owners prior to the 1st of July 2017 are not affected. Owners can continue to claim plant and equipment depreciation and capital works deductions. A property owner will not be able to claim depreciation on pre-existing plant and equipment assets within properties which have been lived in as a primary place of residence where the owner decides to rent the property out after the 1st of July 2017. Plant and equipment assets within this scenario are considered previously used. There are scenarios where the values of plant and equipment will be needed. This includes when an asset is scrapped, where there is a partial or full CGT exemption and where the exchange date and settlement date on the sale of the property occur in separate financial years. Depending on the circumstances, a property investor who is unable to claim depreciation on previously used plant and equipment assets due to these amendments should be able to claim a capital loss for the decline in value of the plant and equipment assets. This capital loss should only be able to offset a capital gain and if needed can be carried forward to offset future capital gains. Case study The below scenario explains in detail how depreciation plays a role in assisting a residential property investor to improve the cash return from their property. It also compares the depreciation deductions for the first full financial year on a three year old house purchased for $600,000 before and after the 9th of May 2017. In the example, the owner receives a rental income of $560 per week or a total income of $29,120. Expenses for the property, such as interest, council rates, property management fees, insurance and repairs and maintenance total $41,028. In the first scenario, the owner is able to claim a total depreciation claim of $12,397 from both capital works deductions and plant and equipment depreciation. Using depreciation, this investor is experiencing a weekly cost of $56 per week to hold the property. In the second scenario, as the owner exchanged contracts on the property after the 9th of May 2017, they are only able to claim $6,126 in capital works deductions and will be unable to claim $6,271 in plant and equipment deductions. This reduced claim would result in the investors weekly cost of holding the investment property increasing from $56 to $101, a difference of $45 per week or $2,340 in the first full financial year. It’s important to note that the change will have the same effect on both positive and negative cash flow scenarios. While we believe that generally the integrity measure has merit, the legislative changes go much further than what was necessary to deliver on the government’s intention of stopping subsequent owners from claiming deductions in excess of an asset’s value. The approach outlined in the legislation treats residential property investors differently by extinguishing a property investor’s ability to claim a deductions based upon a transaction. We believe this is caused by gaps in current legislation around establishing a depreciable value for second-hand plant and equipment. 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.

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Property investors to lose out from proposed budget changes

BMT team — Thu, 11 May 2017 06:23:46 +0000

The 2017 Federal Budget, handed down by Treasurer Scott Morrison on Tuesday night, 9th May at 7:30pm AEST includes proposed changes which will affect residential property investors Australia-wide. The Australian Tax Office (ATO) allows owners of income producing property to claim depreciation deductions for the wear and tear that occurs to a building’s structure and the plant and equipment assets within. The proposed changes relate to the depreciation of plant and equipment assets and the eligibility to claim this deduction. Currently, investors are eligible to claim qualifying plant and equipment depreciation on assets found in an investment property they purchase, even if they were installed by a previous owner. “Under the new rules which are yet to be legislated by Parliament, investors will be able to depreciate new plant and equipment assets and items they add to their property, however subsequent owners will not be able to claim depreciation on existing plant and equipment assets,” said the Chief Executive Officer of BMT Tax Depreciation, Bradley Beer. “This change will have a major impact on investors, essentially reducing the annual deductions they can claim therefore reducing their cash return each year. This could lead to investors being in a tighter financial position and may discourage future investors from purchasing a second hand residential property,” said Mr Beer. “It is our understanding at this stage that if the property is new, they will be able to continue to depreciate plant and equipment as they were previously. We are seeking further clarification on this,” said Mr Beer. Investors will still be able to claim capital works deductions also known as building write off, including any additional capital works carried out by a previous owner. The budget notes were clear that existing investments will be grandfathered. This means that anyone who has purchased a property up until the 9th of May 2017 will be able to claim depreciation as per normal. If a property investor exchanges contracts to purchase a second hand property after 7:30pm on the 9th May, there could be different depreciation rules applicable to their scenario. “We are currently speaking with government to further understand the intricacies relating to the budget notes and the proposed changes to depreciation of plant and equipment assets,” said Mr Beer. This article was originally published as a media release at www.bmtqs.com.au/news-media/media-releases/property-investors-lose-out-budget-changes

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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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