» Renovations

The Block 2022 depreciation schedules

BMT team — Thu, 10 Nov 2022 00:58:15 +0000

The Block 2022 was like nothing audiences – or crew – have experienced before. From the charming location and impressive renovations to the jaw-dropping depreciation deductions and unexpected auction outcome, this season has been the most extraordinary yet. Generating a record-winning profit of $1,586,666.666, Omar and Oz have won The Block 2022 selling their property at auction for $5,666,666.666 to serial Block buyer Danny Wallis. Danny Wallis also purchased the following two properties sold on auction day including Tom and Sarah-Jane’s House 1 which sold for $4,100,000.99, generating a profit of only $20,000.99, and Rachel and Ryan’s House 2, which sold for $4,249,000.50 post-auction generating a profit of $169,000.50. The Block 2022 is located in picturesque Gisborne South within the Victorian Macedon Ranges. Only a forty-five-minute drive from Melbourne, Gisborne is known for its sprawling country homesteads, tree-lined streets, comfy cafés and restaurants with beautiful wineries and olive groves. The location hits this year’s theme of ‘tree change’ spot on. The teams were assigned with renovating their properties into homestead-style houses plus host Scott Cam renovated a house of his own. All houses contain five bedrooms, three bathrooms and spacious living and dining areas with luxurious butler’s pantries, walk-in wardrobes and mudrooms. For the first time, contestants were also tasked with planning the landscaping for more than 700 square meters. BMT Tax Depreciation was asked to estimate the depreciation deductions available on this season’s properties on The Block. Below we outline the deductions found and just how advantageous they could be for an investor buyer. Jaw-dropping numbers Because of the substantial renovations completed and brand-new assets installed the houses are brimming with depreciation deductions. The table below demonstrates the depreciation deductions BMT found on The Block 2022. Ankur and Sharon’s house (House 3) generated the highest deductions with a total of $5,840,166, more than $100,000 higher than house two in second place. The other houses don’t fall far behind with an average total of $5,292,597 in depreciation deductions and an average of $203,340 in the first full financial year. There was a total of $31,755,586 in depreciation deductions found across all six houses for the life of the properties. To break this down the total capital works deductions (Division 43) were calculated at $28,911,186 and the plant and equipment (Division 40) deductions totaled $2,844,400. The Block auction which was held on Saturday 5 November was no doubt discouraging for the other two teams, but this isn’t game over for properties that failed to sell on auction day. Nine will “continue to negotiate with interested buyers to sell these homes, which are still on the market”, Scott Cam revealed. These properties still have the potential to fetch well over the reserve. While the auction didn’t go according to expectations, The Block properties hold the greatest deductions than ever before making it an enticing purchase for investors. Bradley Beer, Chief Executive Officer of BMT, said that savvy investors will take these lucrative deductions into account when considering any Block purchases as these deductions have the potential to significantly improve an investor’s cash flow. The houses on The Block undergo extensive renovations including new flooring, new roofing, new shelving and cabinets, new kitchens and bathrooms and even new rooms constructed. These upgrades make for attractive deductions. The houses are essentially stripped down to their structural component and built back up. Substantial renovations boost an investor’s eligibility for depreciation deductions. With over thirty million dollars in depreciation deductions, the houses on The Block are a property investor’s goldmine. They’re filled with brand new assets, have strong tenant appeal, low to no maintenance (as they’re newly renovated) resulting in fewer annual expenses and offer significant depreciation benefits. The appliances on The Block alone generated strong deductions. For instance, Omar and Oz’s kitchen features $250,000 in top-end appliances. Even if the furniture and other assets are removed for future tenants, the fixtures and fittings alone such as light fittings, kitchen and laundry appliances, blinds and curtains and more hold profitable deductions. Claiming depreciation is an essential step to not only optimising cash flow but also building and maintaining a successful property portfolio. This applies to all types of property investors. With over twenty years’ experience BMT Tax Depreciation are the industry’s leading experts in property depreciation. To learn more about the depreciation available in substantially renovated properties or depreciation in general contact BMT on 1300 728 726 or Request a Quote.

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Understand how Investment property renovations increase tax deductions, rent and property value

BMT team — Mon, 17 Oct 2022 06:06:34 +0000

BMT Tax Depreciation are often asked what investors can do to increase tax deductions and boost cash flow. One way is to renovate! Investment property renovations increase tax deductions, help with increasing a property’s value and improve rental yield leading to greater returns. This article outlines the different types of investment property renovations, what to look out for and how to maximise tax deductions. Depreciation explained Greater returns Repairs, maintenance and capital improvements Previously used plant and equipment can’t be claimed Scrapping Renovations completed by a previous owner Cosmetic versus substantial renovations Maximise the tax benefits with depreciation Depreciation explained Depreciation is the natural wear and tear of a property and the assets within it over time. The Australian Taxation Office (ATO) allows owners of income-producing properties to claim this as a tax deduction. There are two types of deductions available to claim. Capital works deductions (Division 43) is a claim available for the building’s structure and the assets that are permanently fixed to the property. And plant and equipment depreciation (Division 40) is a claim on the assets that are easily removable from the property or mechanical in nature. Capital works deductions are a fixed amount that can be claimed each year on all applicable building structures for up to forty years. Plant and equipment items have varying effective lives and therefore can be depreciated at an increased rate which varies depending on the asset and the method used to calculate the claim. Greater returns Renovating an investment property will not only heighten depreciation deductions but can also increase the capital growth and rental return. Even updating the flooring, adding a fresh coat of paint and updating areas like the kitchen or bathroom can attract better quality tenants and increase rental return. The case study below demonstrates a scenario where an investor completed a $65,000 renovation. Here is the investor’s scenario before and after completing the renovation • Original purchase price (before renovation) = $610,000 • Rental income per annum prior to renovation = $20,580 • Total renovation spend (completed in 2021) = $65,000 • Property value on completion = $785,000 • Rental income per annum after renovation = $27,040 Due to the renovations completed the property’s value increased by $175,000 and yielded an additional $6,460 per annum in rental income to. Repairs, maintenance and capital improvements Knowing the difference between repairs, maintenance and capital improvements is particularly important when renovating. According to the Australian Taxation Office (ATO), repairs are considered work completed to fix damage or deterioration of a property, such as replacing part of a damaged fence. This occurs when an asset is already damaged or deteriorated and therefore requires repairing. Maintenance, on the other hand, is work completed to prevent damage or deterioration of an asset. For example, oiling a deck is considered maintenance as it helps to preserve the quality of the property and prevent future corrosion. The total cost incurred to repair or maintain your investment property can be claimed as an immediate tax deduction in the year of the expense. However, the ATO specifies that initial repairs for damage that existed when the property was purchased does not always qualify for repairs and maintenance and therefore not always 100 per cent is claimable in the first year. Instead, these costs are treated as capital improvements and depreciated as capital works deductions or depreciation of plant and equipment. A capital improvement is considered any works that improve a property beyond its original state. According to TR 97/23, an ‘improvement’ provides a greater efficiency of function in the property – usually in some existing function. Some indicators that the work performed is an improvement include whether the work will: • extend the property’s income-producing ability • significantly enhance its saleability or market value, or • extend the property’s expected life For investors who already possess a BMT depreciation schedule and would like to update minor upgrades they can do this via email, the MyBMT portal or a phone call. Previously used plant and equipment can’t be claimed Residential property investors completing renovations should be aware of the 2017 legislation changes. The legislation stipulates that investors who purchased property after 7.30pm on 9 May 2017 are unable to claim deductions for the decline in value of previously used plant and equipment found in second-hand residential properties. But these investors can still claim depreciation on new plant and equipment assets added to a property and all structures new and old as capital works deductions. It’s common for investors to live in their property while renovating. While this may seem like a good idea, all plant and equipment assets like air-conditioning units, light fittings and hot water systems will be classified as previously used and no longer be eligible for depreciation deductions due to the legislation changes. Scrapping Assets may be removed while there is remaining depreciable value left over, claiming this un-deducted value is commonly referred to as ‘scrapping’. Scrapping value is essentially the un-claimed or un-deducted depreciable value of an asset at the time of removal. The scrapping value is calculated as follows: Scrapping value = original depreciable value – deducted value to date For example, if the original value of an asset or part of a building was $8,000, and $6,000 was claimed by the time of the asset’s disposal, the ‘scrapping value’ or part of a building would be $2,000 (assuming no amount is received on disposal). The owner could then claim the $2,000 as an instant tax deduction in the same financial year as removal. It’s important to talk to a quantity surveyor before removing any items so they can capture the assets available for capital works or plant and equipment depreciation deductions. Renovations completed by a previous owner Many older properties have had renovations completed by previous owners, these works are often qualifying and can be claimed by current owners. For instance, if a property was built in 1979 but renovations were completed in 1993 the capital works for the renovation […]

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Office renovation depreciation – case study and tax benefits

BMT team — Tue, 19 Apr 2022 06:54:06 +0000

With ‘working from home’ arrangements more commonplace since the start of the pandemic and social distancing now the norm, many businesses have recently altered their office layouts. Office renovation depreciation has always offered lucrative tax deductions. But since temporary tax depreciation incentives were introduced, office renovation has become even more attractive for the businesses that occupy them. In this post we discuss what’s happened in the office sector since the onset of the pandemic and look at an office renovation depreciation case study. Contents: Demand for office space since the pandemic Office renovation depreciation case study Demand for office space since the pandemic Since early 2020, companies have been faced with the incredible challenge of shifting their office-based employees to working from home arrangements, to adhere to state-mandated COVID-19 rules put in place to protect peoples’ health. Lockdowns and work from home orders lasted for months in some states, resulting in a great deal of office space going unused for prolonged periods. Many people held the expectation that more businesses would continue to employ either a full or hybrid working from home model, leading them to think that ongoing demand for office space would be lower than pre-pandemic. And while there was a sharp drop in demand initially, what is interesting is that demand for office space has rebounded, despite working from home arrangements still being in place for many businesses. Ken Morrison, Chief Executive of Property Council of Australia, said “While aggregate vacancy levels have risen slightly from 11.9 per cent to 12.1 per cent, the driver of this has been new supply of office space, not a drop in demand. The reality is that most CBD businesses continue to see the office as integral to their future, and that is reflected in the increased demand for office space over the past six months.” So, what is driving this demand? It appears that many businesses are not just growing in staff numbers but are needing more space to accommodate for social distancing measures, even in those businesses where employees work remotely for part of the week. While we can’t predict how long this will continue, we can rely upon the lucrative depreciation deductions available on office buildings and fit outs. Depreciation case study ‘Business A’ is a medium-sized business entity. It leases office space occupying a partial floor of a Sydney office tower. The space was originally fitted out in 2018 (prior to the COVID-19 pandemic) and is now going to be expanded to accommodate larger collaborative workspaces, social distancing and future growth in head count. The following table demonstrates the depreciation deductions available for the owner of the property (the landlord) and the business operating from it (Business A, the lessee). These deductions provide a healthy boost to cash flow for both Business A and the landlord. Note the large boost in deductions for Business A in year five, which takes into account the instant asset write-off for some of the new fit out. Some of the larger immediate deductions available to Business A from the Year 5 expansion include $60,000 for computer equipment, $33,000 for floor coverings and $14,000 for desks. Meanwhile, the landlord can continue to claim capital works deductions and plant and equipment depreciation on items such as air conditioning, lighting, switchboards and automatic doors. Tax depreciation schedules are key to claiming the maximum depreciation deductions. A BMT Tax Depreciation Schedule ensures commercial depreciation deductions are claimed to their full potential and compliantly by applying all industry-specific legislation. BMT also adopts current business incentives including the backing business investment and temporary full expensing depending on the business size, to ensure every cent is claimed. BMT Tax Depreciation has optimised its commercial process to ensure both owners and tenants claim the most deductions possible. To learn more about commercial depreciation of offices, call BMT today on 1300 728 726 or Request a Quote.

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Can you claim previous renovations?

BMT team — Fri, 25 Aug 2017 02:52:46 +0000

One question often asked by investors who are considering purchasing an existing second-hand property is whether or not they can claim deductions for work that has been completed to the property by a previous owner. The rules have always been complicated for investors and for this reason it is best to consult with a specialist Quantity Surveyor for advice for any property being considered and to obtain a comprehensive depreciation schedule. Given the federal government has recently proposed changes to the way plant and equipment items are depreciated, the rules could get even more complicated in future. To help investors let’s take a look at the existing rules which apply, the proposed new legislation changes and some of the property items which may hold hidden depreciable value for investors which they may be unaware of. Unfortunately this often means they can miss out on claiming the maximum deductions available. In this article we will explore: Claiming deductions for the building structure and any structural work Claiming deductions for plant and equipment assets installed by previous owners Example scenario – deductions for work completed by a previous owner Claiming deductions for the building structure and any structural work Under existing depreciation legislation, the Australian Taxation Office (ATO) allows investors to claim capital works deductions in any residential building where construction commenced after the 15th of September 1987. Capital works deductions make up 85-90 per cent of a total depreciation claim. This applies to the structural items of the building and any fixed items, such as the walls, doors, windows, kitchen cupboards, retaining walls, toilets, sinks and the roof. For a residential property, investors are eligible to claim capital works deductions at a rate of 2.5 per cent per year for a maximum of forty years from the property’s completion date. Many investors think that due to these date restrictions, if a property pre-dates 1987 they won’t be eligible to capital works deductions. However, this is often not the case, as many investment properties built prior to 1987 have undergone some form of renovation. The ATO allow owners of properties to claim capital works deductions for structures added by a previous owner so long as the work is completed within the qualifying dates. The good news for investors is that the federal government have not made any changes to the way in which capital works deductions will be applied in future within the drafted legislation proposed. Claiming deductions for plant and equipment assets installed by previous owners This is where the rules could become more complicated in future. Under existing legislation investors could claim plant and equipment items (which are the easily removable assets for example ovens, range hoods, smoke alarms, carpets and exhaust fans) in any residential property no matter how old the building. For these items, the ATO sets an effective life over which deductions should be claimed. However, the rules may change under the federal government’s proposed new legislation and any investor who exchanges contracts on a second-hand property after 7:30pm on the 9th of May 2017 will no longer be eligible to claim deductions on plant and equipment assets installed by a previous owner, only on those items they add to the property themselves. It’s important to be aware that owners of newly built properties will still be able to continue to claim plant and equipment depreciation deductions as normal. For those who exchanged contracts prior to the 9th of May 2017 there is more good news. The federal government has advised that new legislation policy will be grandfathered. This means these investors can continue to claim depreciation for work completed by previous owners under the pre-existing legislation. Of course, the changes are dependent on the outcome of the government passing the draft legislation through the senate. Example scenario – deductions for work completed by a previous owner The following table provides examples of some of the deductions an investor could claim for work completed to an investment property by a previous owner. In the above scenario, the investor exchanged contracts and settled on the property prior to the 9th of May 2017. Therefore they are still eligible to claim depreciation for plant and equipment additions that were made by a previous owner. They also will be eligible to claim capital works deductions for structural work completed. However, if the proposed new rules are implemented and the work completed above is in a property where the investor exchanged contracts after the 9th of May 2017, the deductions would be reduced to only include the structural work completed including fixed items (such as the retaining wall, the outdoor deck, kitchen cupboards and toilet). The table below demonstrates the difference in deductions for an investor who exchanges contracts after the 9th of May 2017 based on the proposed new legislation. If an investor purchases new plant and equipment assets themselves and has these installed to a property, the depreciation for these assets will be able to be claimed using the existing depreciation methods, no matter how old the property is or when they exchanged contracts. A specialist Quantity Surveyor can ensure that an investor claims the correct depreciation deductions based on their individual scenario, including any work completed during renovations. By contacting an expert and arranging a comprehensive tax depreciation schedule, this can help an investor to ensure the deductions they claim are correct and in line with the latest policy enforced by the ATO.

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Help your florist shop bloom by claiming depreciation

BMT team — Fri, 17 Feb 2017 01:03:48 +0000

Given it is the season when many flowers come into bloom, we thought we would take a look at some of the deductions florist shop owners can benefit from by claiming depreciation. Often many business owners are unaware they can claim depreciation. Those contemplating opening a new store can use these deductions to offset any initial costs involved in setting up the business and those who own or tenant an existing store considering adding additional items or renovating could also be entitled to additional depreciation benefits. By taking advantage of depreciation, commercial property owners such as florists can reduce their tax liability. The additional cash flow generated from depreciation could be just what is needed to help boost a business’ budget and help it to bloom. Before starting a small business or completing a renovation to any commercial property, including a florist shop, there are some facts to be aware of 1/ Both the building owner and commercial property tenants can claim While some Florists own the building in which they operate their business this is not always the case. The owner of the building is entitled to claim capital works deductions for the original building structure. They can also claim deductions for any of the easily removable plant and equipment assets contained in the building. Florist shop owners who rent commercial premises can also simultaneously claim deductions for any of the fixtures and fittings they install within a property in order to make it suitable to operate. 2/ A depreciation schedule should be obtained before any major renovations If you are planning on giving your Florist shop a fresh coat of paint to blend in with all the beautiful flowers, this probably won’t need a schedule as this work is not considered a capital works improvement. However, if you are removing a wall or adding any structures or assets you should have a depreciation schedule completed before starting work. Once the place is renovated like a fresh posy of daisies, an updated depreciation schedule may be required to outline deductions for any new items which have been added. 3/ Tenants should check what happens when they vacate Some lease conditions mandate that tenants should return a commercial property to its original condition should they later decide to vacate. Any items removed during a lease due to a renovation or removed on termination of a lease may have a remaining depreciable value. The last thing you’ll want to do is lose money on these items by throwing them away like wilting bouquet of daffodils. Ask a Quantity Surveyor about a scrapping report. This will allow you to claim any remaining deductions in the year the item is removed and you vacate. Example deductions The following table provides an example of the deductions a florist shop owner can claim for some of the common assets found within a florist shop. In the first financial year, this florist owner was able to claim $9,712 in deductions for these items alone. Over five years, their cumulative depreciation claim for these items equated to $39,346. With these kinds of deductions applied to a tax claim, for those who have spent a large sum of money setting up the store or installing new fit out, you’ll be able to turn any initial losses around and soon everything will be coming up roses.

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Why granny flats are no longer just for grannies

BMT team — Wed, 06 Jul 2016 08:49:17 +0000

The idea of a granny flat as a bland single room dwelling has changed. They used to be a way to keep grandma close by, with a single burner stove, a toaster and a single bed. But these assumptions are being challenged by the New South Wales granny flat industry boom. The rules have changed… Since the legislation change in 2009, building a granny flat has become a far easier process and approval can be granted within ten days. Additionally, the rules around how they can be used have been altered and now enable property owners to make money by renting out their secondary dwelling. This change has fueled demand for granny flats, with builders creating accommodation that ranges from modest studios to multi-bedroom mini-homes. Homeowners across the state, and in Sydney particularly, can then take advantage of the demand for comfortable, affordable rentals in close proximity to the CBD. Alongside New South Wales, homeowners in Tasmania, Western Australia and the Northern Territory are able to generate income with a secondary dwelling. This opportunity has given architects and designers new challenges as they attempt to create small homes that maximise the available space, remain comfortable and functional and stay within a budget much smaller than that of a standard sized house. This has seen a 240 per cent increase in the number being built and these numbers are similar in Western Australia. … but not for everyone The laws differ from the state to state and in Victoria and South Australia, a granny flat must be actually used to house a family member. The tighter laws around secondary dwellings mean that it isn’t possible use one to legally generate additional income. These laws dictate that a granny flat or dependent person’s unit can only be occupied by a dependent of the resident of the main dwelling – generally a family member. Once the person leaves, the structure has to be removed. To build a permanent dwelling requires planning permission and subdividing the land, which is a costly process. Queensland property owners should check with their local council to discuss regulations on whether they are able to rent a granny flat for income-producing purposes. Add versatility and space to your existing home Building a granny flat isn’t just about making money though. A granny flat can have a wide range of uses, both allowing homeowners to keep friends or family close to home, or for creative endeavours and activities. The extra indoor space and self-contained freedom a secondary dwelling provides can be used for anything from a place for the kids or grandparents to stay when they visit, or a place to practice yoga, paint, retreat from the world, and more. The humble granny flat has seen a resurgence in the last five years and continues to add value in a competitive property market. Regardless of the purpose, if you own a home with enough space, then adding a secondary dwelling could be the edge you need when selling or letting your property. It is important to seek expert advice regarding the laws in your state and what is and isn’t permissible.

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Don’t move house… renovate

Chan Naylor Team — Thu, 30 Jun 2016 05:10:50 +0000

Moving could cost you a fortune I see many clients that move from house to house throughout their lifetime and they do that for various reasons. The house is too small for a growing family, they need to be closer to schools and transport, or maybe they want to live in a different area. All are legitimate reasons however if you stop and assess what its costs to move house each time, you may think twice and consider staying put. So what is the actual cost of moving house? Well beyond the emotional strain placed on people when they move let’s look at the ‘hard costs’ by taking a sale of an average home in Sydney and Melbourne of say $1,000,000 and then assume an upgrade to a new house worth $1,500,000. Firstly, we have to contract an agent to manage the sale of our existing property and he will generally charge you around 2 per cent plus GST so that’s approximately $22,000 (2.2 per cent of $1,000,000). Now let’s take the stamp duty on the purchase on the new property of 1.5m (using NSW stamp duty) would be approx. $69,000. Legal fees for your lawyer to handle settlement would be say $2,000.00. Other associated costs say $5,000. Total cost upfront to move house in this example is approximately $100,000 which leaves us now with only $900,000 to buy a house worth $1,500,000 assuming there is no debt. On top of this we may now need to borrow $600,000 to make up the gap ($900,000 – $1,500,000) and let’s assume an interest rate of 5 per cent, therefore the interest would be $30,000 per annum. Let’s keep it simple and look at the cost of simply staying put and renovating. Let’s assume it will cost you $500,000 to renovate your existing home to an equivalent standard of what you need. Borrowings required of $500,000 @ 5 per cent = $25,000 in interest per annum compared to $30,000 interest per annum if we moved. That is a saving of $5,000 pa over twenty years = $100,000 saving. But let’s say we could also unlock equity by borrowing that extra $100,000 we have saved by renovating our existing home and by staying put and then used that extra amount as a deposit on an investment property worth say $500,000. Example: purchase another investment property with the $100,000 $75,000 – 15 per cent borrowings plus costs (we had a saving of $100,000 by staying put and renovating and assume $25,000 in acquisition costs leaving $75,000 for a 15 per cent deposit on the investment property) $425,000 – 85 per cent borrowings from bank (Assume mortgage insurance) $25,000 – borrowings costs of purchase $525,000 – purchase price, costs and total borrowings for investment property Let’s now calculate the cost of holding this investment property over time, assuming a net rental return of 4 per cent. Net rent – $20,000 ($500,000 @ 4 per cent) Interest on loan – $26,250 ($525,000 @ 5 per cent) Net tax deductible loss – ($6,250) per annum assuming a 46 per cent tax rate actual cash loss after tax claims = ($3,375.00 per annum) Remember we would have saved $5,000 pa by staying put and renovating for $500,000 and not borrowing $600,000 to move house which means from a cash flow perspective we are better off by $1,625.00 per annum net of tax savings ($5,000.00 – $3,375.00). Assuming after renovations the property value base is $1,500,000 plus, we have another Investment property of $500,000 that gives us a $2,000,000 capital base with better cash position to fund it. Assuming that the property value will double every ten year principle applies, in twenty years your asset base of $2,000,000 has increased to $8,000,000 ($2,000,000 x 2 = $4,000,00 x 2 = $8,000,000) compared to if you had moved a potential capital base of $6,000,000 ($1,500,000 x 2 = $3,000,000 x 2 = $6,000,000). Note: These numbers above are approximates and just a means of an example and I do realise that there would be variables, but the point I am trying to make is that you should carefully consider the long term cost before you decide to move house. I appreciate we all have personal reasons for wanting to move but you need to be aware from a financial point of view that it may not be the best outcome and could cost you hundreds of thousands if not millions over a twenty year period. These numbers are only to provide an example, always seek professional advice on your personal situation before making any investment decisions. For further information about how Chan & Naylor can help assist you visit www.chan-naylor.com.au or phone 1300 250 122.

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Maximise your investment property’s appeal with smart renovations

BMT team — Tue, 17 May 2016 07:35:50 +0000

When leasing an investment property, naturally you will want to receive the best rental return for it. Maximising the rental return doesn’t mean you need to spend money on adding new rooms or significant renovations. In fact, the most cost-effective improvements are often the simplest. Quick and easy fixes The simplest thing you can do to add value to your property is paint the front door. First impressions are vitally important when attracting tenants and an appealing entrance is the first step. A fresh coat of paint can hide a multitude of sins and give your whole property a fresh, modern look at a fraction of the cost of other additions. Before you rent the property, it is recommended to have a registered professional such as a plumber check that there are no leaking taps and that these meet any minimum criteria set by your state government for passing on water usage charges. It is also worthwhile having an electrician check for any flickering lights to have these fixed and to take care of any other outstanding maintenance. Tidying up the yard by removing weeds and adding fresh mulch or wood chips can give a property street appeal and any work completed will go a long way to convince potential tenants that everything is in good working order. Landlords should also ensure that an adequate number of smoke detectors have been installed in the property and that any cords attached to internal window coverings or blinds can be secured away from reach. Larger investments Potential tenants will look at dated or rundown kitchens and bathrooms as reasons to negotiate a lower rent and sometimes you won’t attract the calibre of tenant you want. Repairs to bathrooms and toilets should be considered urgent and vital to attracting quality tenants. Simply replacing chipped or cracked tiles, adding a new toilet seat and a coat of paint can work wonders. However, occasionally a complete bathroom refit may be in order. Landlords who are planning on completing any structural renovations should speak with one of our specialist Quantity Surveyors before starting any work. This is because any items removed during a renovation may impact the depreciation deductions that can be claimed. Newly installed structures and assets also hold depreciable value that the owner can claim at tax time once the property is income producing. A house can live and die on the quality and appearance of the bathroom and toilet, which makes any money spent here a good investment. The key for bathroom and kitchen renovations is to aim for clean simplicity, with neutral fittings and colours that will appeal to more people. Make sure your upgrade suits your home It is important to ensure anything you add to your property complements the existing décor, structure and location. Adding a hot pink extension to your Queenslander isn’t going to increase its value. Other questionable investments, such as adding a swimming pool or spa, may not reduce the rental income you receive, but they also might not increase the weekly rent either. Items such as these can cost you a considerable amount to install and while a property which contains these items will allow you to claim depreciation deductions for the pool or spa and any cleaning devices or pool filters, not every tenant will want to rent a property where they will need to spend their time looking after these items. Often pool and spa editions can actually limit the tenants a property attracts. The key is to understand the market in your area, the features of other houses available for rent nearby and the expectations of people looking in the same neighbourhood. Your first port of call for this advice will be a local Real Estate Agent or Property Manager. They will be able to give you a breakdown of similar properties and help you make informed, valuable improvements to your house. Depreciation deductions and residual values when renovating As we explained earlier, the good news when completing any renovations is that they can add to the depreciable value of your investment. Any construction work completed to a residential property after the 15th of September 1987, regardless of whether you owned the property at the time, can be claimed at a rate of 2.5 per cent per year for the life of the property or forty years. This means that even a twenty year old kitchen that looks a little dated and worn still has considerable depreciation deductions available for the owner. Investment property owners may be able to take advantage of claiming any residual depreciation for items that are thrown away or demolished during a renovation. For example, if a bathroom in a property constructed twenty years ago in 1996 is replaced, based on legislation enforced by the Australian Taxation Office (ATO) the owner will still be able to claim another twenty years’ worth of deductions for the structural items the bathroom contains. The depreciation available for plant and equipment items contained in the bathroom such as shower curtains, bathroom accessories and hampers for example, will vary as these depend on the individual effective life and depreciation rate set by the ATO. This means landlords should consider the age of each of item and how much value is remaining. Even things that may seem tired and worn out may have considerable residual depreciation value. Demolishing, replacing or discarding items should be a carefully considered process. Keep it simple Ultimately, an investment property isn’t a house you will live in and any work should bear this in mind. You don’t want to alienate any prospective tenant by adding too much of your own taste as this will be their home, not yours and you don’t want to over-capitalise on your investment with unnecessary and expensive renovations. Above all, aim for simplicity with your renovations and let the property speak for itself.

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The Four Grand Slams of Property Depreciation Deductions

Bradley Beer — Fri, 23 Jan 2015 05:30:59 +0000

As one of the four tennis Grand Slam tournaments, the Australian Open moves into the business end of the competition. Players will dig deep, steel their focus and demand more from their bodies in order to take their game to another level. At the end of it all there can only be one winner, and those who win will be those whose tennis game both mentally and physically has come together for the crucial part of the tournament. With property depreciation you can always win by getting more out of your depreciation claim with our 4 grand slams of depreciation tips. Become BMT Smart and take these tips into account to start maximising your depreciation deductions. Get more out of your property depreciation claim with these simple tips A large part of property investing is maximising your tax deductions. While many investors fail to claim property depreciation, many more may be aware but are missing out by only claiming a fraction of their full depreciation entitlements. Here are some ways property investors could be able to increase their yearly tax deductions by thousands. New and older properties have depreciation claims available As a property gets older, its value naturally depreciates with or without a tax deduction claim. The older a property is, the less value remains to be depreciated and claimed for. A new property allows investors to claim far more depreciation deductions as the property has lost little or none of its original value. Additionally, while plant and equipment deductions can be claimed for all investment properties, capital works deductions cannot be claimed on residential properties constructed prior to 15th September 1987. Don’t overlook capital works deductions Statistics released by the Australian Tax Office (ATO) indicate that approximately 2.5 million property investors claimed some form of deduction for the 2011-2012 financial year. Of these, 1.7 million investors claimed property depreciation for plant and equipment, while only 1 million investors claimed deductions for the building’s structure and fixed assets as capital works deductions. If your investment property was constructed from 15th September 1987 onwards and you are not claiming capital works deductions, you are missing out on dollars in your pocket. Even if you haven’t been claiming these deductions previously, the ATO allows two previous tax returns to be amended to recoup missed deductions. Claim renovations completed by the previous owner Anything in the property that occurred in a previous renovation can be estimated by a Quantity Surveyor and deductions calculated accordingly. This includes items that are not immediately obvious, such as an old extension or new plumbing. For capital works to be eligible for the capital works deductions, construction must have commenced within the qualifying dates; after 15th September 1987 for residential properties and from 20 July 1982 for commercial buildings. Get back what you throw away When property investors start watching too much of ‘The Block’ or ‘House Rules’ and begin planning renovations to their investment property, it is little known that they are able to claim tax deductions for assets discarded during renovation. By organising depreciation schedules both before and after the renovation to support their claim, investors are able to claim any remaining deductions from the items being removed and start claiming depreciation on the newly installed items. For savvy property investors, property depreciation offers significant tax allowances. The above four tips are just a few of the ways that a comprehensive and accurately prepared depreciation schedule can help improve an investors’ cash flow. Want to know more? Call us on 1300 728 726 or complete this form and we’ll be in contact with you to discuss your property.

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Could depreciation deductions be a clue to the reserve order for The Block Glasshouse auction?

BMT team — Wed, 24 Sep 2014 05:08:34 +0000

Over the last three years, BMT Tax Depreciation has had the opportunity to prepare the tax depreciation estimates for The Block TV show on the various renovation projects they’ve taken on. Each year we have come to expect the deductions to be more than the previous year as the projects get bigger and better and this year is no exception. BMT Managing Director Bradley Beer will be appearing on tonight’s episode of The Block Glasshouse to help blockheads Darren and Dee understand what a property investor could expect in terms of depreciation deductions for their apartment. In presenting the estimated depreciation deductions for each apartment we could be revealing an inside scoop to the order of reserve pricing for all of the apartments heading into auction as it represents the total amount of construction expenditure. So, based on the depreciation deduction range for year one as well as the total minimum and maximum range of depreciation deductions that an investor can expect for each apartment on The Block Glasshouse, could this be the reserve price order also? Watch: Bradley Beer on The Block Glasshouse: Terraces Take Shape

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