» tax depreciation deductions

9 tax depreciation facts every investor needs to know

BMT team — Thu, 14 Apr 2022 00:28:49 +0000

BMT Tax Depreciation has prepared over 700,000 schedules and found clients an average of $9,000 in the first full financial year deductions. However, BMT’s research shows that up to 80 per cent of property investors still fail to take full advantage of claiming tax depreciation. When it comes to managing a property portfolio and claiming all the right deductions there is an overwhelming amount of information. So, we thought we’d break down 9 tax depreciation facts. Fact 1. Tax depreciation is the highest non-cash deduction Fact 2. Two types of property depreciation deductions Fact 3. Legislation changes don’t affect capital works claims Fact 4. Legislation changes don’t affect substantially renovated property Fact 5. The immediate deduction boosts cash flow Fact 6. New and old properties hold depreciation Fact 7. Low-value pooling accelerates depreciation Fact 8. Hidden deductions are found in common property Fact 9. Site inspections are a key to step to maximising compliant claims Fact 1. Tax depreciation is the highest non-cash deduction Tax depreciation is a non-cash deduction, meaning investors don’t need to spend any money in order to claim it. Overall, property depreciation is the second-highest deduction available for property investors. Tax depreciation comes second only to costly mortgage interest repayments. Fact 2. Two types of property depreciation deductions There are two types of depreciation deductions available to claim. The first type is capital works (Division 43). This is the building’s structure and the assets that are permanently fixed to the property. These assets can include garages, fences, and built-in kitchen cupboards. On average, capital works deductions make up 85 to 90 per cent of the total depreciation claim. The second type of depreciation is plant and equipment (Division 40). These assets are easily removable from the property or are mechanical in nature. This can include blinds and curtains, light fittings and security systems. While these typically are less than capital works, they still hold significant deductions. Due to legislative changes, there have been adjustments to how plant and equipment deductions can be claimed on second-hand properties, further explained below. Fact 3. Legislation changes don’t affect capital works claims In 2017 the Australian Government made changes to depreciation legislation. The changes meant that owners of second-hand properties purchased after 9 May 2017 could no longer claim depreciation on previously used plant and equipment assets. Investors could still claim plant and equipment deductions on new assets purchased for the property. It’s important to note the legislation changes don’t impact eligibility to claim depreciation deductions for qualifying capital works. Fact 4. Legislation changes don’t affect substantially renovated property A property is considered substantially renovated when all, or substantially all of a building is removed or replaced. Some key examples of substantial renovations include replacing foundations of the building, walls, floors, roof or staircases. If an investor purchases a second-hand property directly after its substantial renovation, the 2017 legislation changes do not apply. This means the new owner is eligible to claim on all new plant and equipment assets and the capital works. Fact 5. The immediate deduction boosts cash flow Investors can further boost their cash flow by claiming the immediate deduction on eligible assets valued up to $300. This immediate deduction can be claimed in the year of purchase and there’s no limit to the amount of assets that can be claimed. This means that if they are eligible, the investor can potentially boost their cash flow by hundreds if not thousands of dollars. Fact 6. New and old properties hold depreciation There is a common misconception that older properties cannot hold depreciation deductions, which is false. Deductions can be found in most properties, from brand new properties to properties built over twenty years ago. Unfortunately, many investors rule out claiming depreciation as they believe their property is too old. An obligation-free tax depreciation estimate from BMT can provide the answer. BMT also guarantees to find double their fee in deductions in the first full financial year or they won’t charge for their services. Fact 7. Low-value pooling accelerates depreciation Low-value assets that aren’t eligible for the immediate deduction are often placed in the low-value pool. Low-value pooling allows owners to claim depreciation at an accelerated rate. When a plant and equipment item is allocated to the low-value pool, it can be depreciated at a rate of 18.75 per cent in the first year and 37.5 per cent each following year. An item can only be included in the low-value pool if it is a low-cost or low-value asset. Low-cost asset: opening value of $1,000 or more. Low-value asset: a written down value of $1,000 or more. When an asset’s opening value was more than $1,000 but the residual value is now less than $1,000. Fact 8. Hidden deductions are found in common property When an investor purchases a property such as an apartment or townhouse in a complex, it will often be under a strata title. Owners of these properties can claim an apportioned deduction of the common property assets under the strata. These may include elevators, intercom systems and ventilation fans. BMT’s specialist site inspectors determine the value of these assets for depreciation purposes by defining the owner’s interest in the asset. Due to depreciation only being available for a portion of the asset, it may fall into the low-value pool or will qualify for an immediate deduction. Fact 9. Site inspections are a key to step to maximising compliant claims Both the National Tax and Accountants’ Association (NTAA) and the Australian Institute of Quantity Surveyors (AIQS) recognise that physical site inspections are essential for claiming maximum deductions compliantly. Failing to conduct site inspections often results in missed deductions or errors made on the tax depreciation schedule. BMT’s specialist site inspectors conduct physical site inspections, ensuring an accurate tax depreciation schedule is completed that maximises deductions and is ATO compliant. For over twenty years, BMT Tax Depreciation has been the most trusted specialist in the industry nationwide. To learn more about how you can start […]

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Depreciation and our iconic Australian tourist attractions

BMT team — Thu, 24 Jan 2019 22:01:21 +0000

Our beautiful Australian landscape, culture and iconic landmarks have become a beacon for tourists far and wide, who continue to flock to our nation each year to enjoy all our vast country has to offer. To celebrate our national day, BMT Tax Depreciation took a look at several tourist destinations and crunched some numbers to find out what their depreciable value could be if they were an investment property. The astronomical numbers may astound you. Dreamworld, Gold Coast QLD Dreamworld is a theme park and zoo situated on the sunny Gold Coast in Queensland. It’s recognised as Australia’s largest theme park, boasting over forty rides and attractions, including five impressive roller coasters. The owners of this popular theme park could claim a whopping $12,142,000 in depreciation deductions in the first full financial year alone and a massive $52,346,619 in the park’s first five cumulative years. Royal Australian Mint, Canberra ACT The Royal Australian Mint is the sole producer of all of Australia’s circulating coins. Opened in 1965 and situated in the suburb of Deakin within Australia’s capital city of Canberra, the Mint is a very popular tourist destination for visitors and locals alike. BMT estimate that if the Royal Australian Mint were an investment property, its owner could claim a massive $6,061,486 in deductions in the first year and $22,287,084 cumulative deductions over the first five years. SEA LIFE Sydney Aquarium, Sydney NSW SEA LIFE Aquarium in Sydney, New South Wales is a popular tourist attraction for families. The aquarium displays more than 700 aquatic species, comprising more than 13,000 individual fish and other sea and water creatures from most of Australia’s water habitats. Visitors can dive in and get up close and personal with these aquatic creatures as they wander through the aquarium on their journey of discovery. BMT found the hidden depreciation treasures of the aquarium and the owner/owners could claim $991,875 in the first full year depreciation claim and $4,393,736 in cumulative deductions over the first five years. Taronga Zoo, Sydney NSW Taronga Zoo is an iconic attraction located on the picturesque shores of Sydney Harbour. The zoo was officially opened on the 7th of October 1916 and is divided into eight zoo-geographic regions. Home to more than 2,600 animals across twenty one hectares, this makes Taronga Zoo one of the largest zoos in the world. BMT discovered if an investor owner the zoo they could claim $8,073,950 in depreciation deductions in the first full year and $38,213,162 in cumulative depreciation deductions over the first five years. That’s a lot of cash that could be put toward the zoo’s animal and native habitat conservation programs. For everyday residential property investors and commercial property owners, we can provide depreciation estimates for any type of property including apartments, houses, industrial buildings and even tourist attractions. To request an estimate visit bmtqs.com.au/estimate or speak with one of our experienced staff on 1300 728 726.

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Tax depreciation myths busted

BMT team — Wed, 03 Oct 2018 05:39:44 +0000

There are many myths out there when it comes to tax depreciation, especially around what property investors can claim. Tax depreciation can benefit anyone with an investment property. It is about working out how much your investment property depreciates over time and claiming these values at tax time. A tax depreciation schedule is all about making your rental property work for you. The experts at BMT Tax Depreciation help to ‘bust’ some common tax depreciation myths. In this article we will look at the following myths: MYTH: My accountant will arrange this for me MYTH: You can only depreciate new properties MYTH: I have had my investment property for two years without a schedule in place so there’s no point now MYTH: It’s just more money to spend each year MYTH: I only have a small unit so there won’t be much to depreciate MYTH: Renovations were completed by the previous owner, so I can’t claim them MYTH: Once I have spent money on an asset or capital work, I can claim it MYTH: More expensive items get higher depreciation MYTH: All construction costs are eligible for depreciation MYTH: My accountant will arrange this for me BUSTED: Accountants, Real Estate Agents and Property Valuers are not allowed to estimate the cost of construction for properties built after 1985. The Australian Tax Office (ATO) has identified Quantity Surveyors as appropriately qualified to estimate the original construction costs in cases where that figure is unknown. MYTH: You can only depreciate new properties BUSTED: Older properties also depreciate. There are two types of depreciation an investor may be eligible to claim, plant and equipment assets for the easily removable fixtures and fittings and capital works deductions for the building structure. Investors can claim capital works deductions on properties where construction commenced after 15 September 1987. They may also be eligible to claim capital works deductions on any structural renovations which have occurred. Changes to depreciation rules announced in 2017 mean some investors may not be eligible to claim plant and equipment. However, these rules do not affect those investors who exchanged contracts prior to 7:30pm on 9 May 2017, owners of new residential properties or commercial property owners. Investors can also claim depreciation on assets they purchase and install themselves once the property is income producing. It is always worth contacting a Quantity Surveyor to discuss whether depreciation applies to your individual circumstances. MYTH: I have had my investment property for two years without a schedule in place so there’s no point now BUSTED: Not at all… You can still claim previous year’s depreciation; this is known as recouping missing deductions and can be done for up to two previous financial years. MYTH: It’s just more money to spend each year BUSTED: A tax depreciation schedule is valid for up to 40 years. The one-off fee is completely tax deductible. MYTH: I only have a small unit so there won’t be much to depreciate BUSTED: Even if you own a small unit or apartment, you may be able to claim part of the common area as well as the unit itself. MYTH: Renovations were completed by the previous owner, so I can’t claim them BUSTED: It doesn’t matter if the works were undertaken by the previous owner. When you purchased the investment property you have also purchased the entitlement to claim depreciation on a of the property’s improvements. What they did with their assets, does not affect you and what you do with the same assets. MYTH: Once I have spent money on an asset or capital work, I can claim it BUSTED: Under Division 40, you can only start depreciating an asset once it has been “used or installed ready for use”. Not as soon as you have paid for the asset. For capital works under Division 43, you can claim deductions only once construction has been completed. MYTH: More expensive items get higher depreciation BUSTED: Low-value pooling applies to items in an investment property that have a value less than $1,000. Placing items in a low-value pool allows the owner to accelerate the rate of depreciation, increasing deductions earlier. MYTH: All construction costs are eligible for depreciation BUSTED: Not all construction costs are eligible. When claiming depreciation of a building, you are essentially only claiming what is there now. It is also important to note, you cannot claim demolition or site clearing. BMT Tax Depreciation will show you how to claim more deductions, pay less tax and see a greater return on your investment property. BMT Tax Depreciation schedules are designed specifically for ease of use by accountants to incorporate depreciation deductions into an investors’ income tax assessment. All information is prepared in full compliance with ATO regulations, meaning that deductions are detailed and evidenced correctly in the event of an audit. * Under new legislation outlined in the Treasury Laws Amendment (Housing Tax Integrity) Bill 2017 passed by Parliament on 15 November 2017, investors who exchange contracts on a second-hand residential property after 7:30pm on 9 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 a brand-new property will still be able to claim depreciation as they were previously. To learn more, visit the BMT Tax Depreciation website or read BMT’s comprehensive White Paper. Alternatively, for obligation free advice contact the expert team at BMT Tax Depreciation on 1300 728 726.

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Why choose a depreciation expert?

BMT team — Fri, 21 Sep 2018 04:39:39 +0000

It’s well known that you can claim wear and tear on a business vehicle, but did you know that you can also claim wear and tear on your investment property? Many Australians are likely to be unaware that their investment properties hold significant tax depreciation deductions, meaning they could be missing out on thousands of dollars. As your property gets older, the building and items within it start to wear out. The Australian Tax Office (ATO) governs legislation that allows owners of income producing properties to claim a deduction relating to this wear and tear. Depreciation can be claimed for a variety of building types, including both residential and commercial properties, such as offices, hotels, restaurants, retail spaces, educational facilities, warehouses, agricultural properties and many more. Depreciation falls into two different categories: plant and equipment’ includes easily removable fixtures and fittings such as dish washers, ovens, carpet, blinds, while ‘capital works’ covers the structure of the property and permanently fixed assets including bricks, mortar, doors and driveways. Depreciation experts are recognised by the ATO Quantity surveyors are recognised as one of a select group of professionals deemed qualified to provide construction cost estimates for depreciation purposes. They will use their skills to produce a comprehensive tax depreciation schedule, which outlines all the deductions a property owner is eligible to claim for both capital works and any plant and equipment assets they are eligible to claim. Benefits of choosing a depreciation expert You only need to get a depreciation schedule produced once, and it will outline the depreciation deductions for the lifetime of your property. The cost of the report itself is also 100 per cent tax deductible. If you have not previously claimed depreciation, your Accountant may be able to backdate your claim for the previous two years, so you can recoup some additional cash back on previous years’ tax returns. It is interesting to note that assets removed during renovations may also be eligible to be fully written off as a tax deduction. It is a good idea to engage a quantity surveyor prior to construction work starting to make sure that all removed items are identified and captured as part the depreciation report. BMT Tax Depreciation are a national quantity surveying firm, who specialise in the preparation of tax depreciation schedules for a variety of property types. They use their expertise to ascertain the costs of building works prior to or during construction for feasibility cost management purposes. A BMT Tax Depreciation Quantity Surveyor utilises a combination of cost expertise and knowledge of taxation legislation to concentrate on property depreciation. The difference is reflected in a property investors’ bottom line BMT Tax Depreciation will show you how to claim more deductions, pay less tax and see a greater return on your investments. BMT Tax Depreciation schedules are designed specifically for ease of use by accountants to incorporate depreciation deductions into an investors’ income tax assessment. All information is prepared in full compliance with ATO regulations, meaning that deductions are detailed and evidenced correctly in the event of an audit. BMT Tax Depreciation also provide a free, easy to use tax depreciation calculator, which can provide an estimate of available deductions for any property an investor that is planning on purchasing. Alternatively, you can contact one of our expert staff on 1300 728 726 for a free estimate of available deductions.

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Be careful of these depreciation mistakes this tax time

BMT team — Tue, 03 Jul 2018 02:21:39 +0000

Depreciation can be a rather complex area with specific rules, qualifying dates, depreciation rates, methods for claiming and pre-determined effective lives of assets. As such, claiming depreciation deductions can be a confusing task for many property investors. For this reason, it’s imperative that investors get a depreciation specialist to prepare their tax depreciation schedule. This will ensure investors get maximum depreciation deductions and that all claims are legally compliant. The last thing you want is a fine from the ATO for incorrect claims on your tax return. To help property investors ensure their deductions are claimed correctly, here are four common depreciation mistakes to avoid when claiming deductions for an investment property: 1. Not making a partial year claim Rental property owners should only claim deductions for the periods their property is rented out or is genuinely available for rent. Holiday home owners in particular should be aware of this to ensure deductions are claimed correctly. Similarly, if an investor has only owned their property for a few months of that financial year, they can still make a partial year claim for these weeks or months it was income producing. To ensure deductions are correctly claimed for the portion of the year a property is income producing or available for rent, investors should request a tax depreciation schedule. A BMT Tax Depreciation Schedule will outline all qualifying deductions from the date of settlement and include a partial year claim based on the time the property is rented. 2. Claiming capital works and plant and equipment deductions incorrectly Investors who lodge self-assessed deductions often make the mistake of incorrectly allocating plant and equipment assets as capital works deductions and vice versa. This can result in two issues for the investor. Firstly they could over claim, resulting in unwanted attention from the ATO, or secondly they could under claim and miss out on receiving the maximum deductions available. These depreciation mistakes generally occur because investors do not have the knowledge of depreciation legislation necessary to separate items appropriately. Furthermore, it’s because they have not sought adequate advice or requested a tax depreciation schedule. To ensure all deductions are correct and maximised, a specialist Quantity Surveyor will complete a site inspection as part of the process of arranging a depreciation schedule. This inspection allows a depreciation expert to take photographs and note every asset within the property. They will also perform the necessary searches to find any details required to estimate construction costs, including those for any renovations which have taken place, even if completed by a previous owner. A depreciation schedule will outline all deductions available for capital works and separately itemise all deductions for plant and equipment items. 3. Not splitting deductions correctly as co-owners Many co-owners make the mistake of calculating depreciation first and then splitting the deductions based on ownership percentage. However, depreciation legislation allows co-owners to split an asset’s value by ownership percentage first, potentially qualifying them for higher rates of depreciation, meaning more money back in both owners’ pockets sooner. Co-owner investors should request a split depreciation schedule to ensure deductions are outlined based on each owner’s interest in the assets contained within the investment property. 4. Incorrectly claiming repairs, maintenance and capital improvements Expenses for repairs and maintenance are claimed differently to capital improvements. The ATO provides clear definitions of each to help investment property owners to ensure these claims are made correctly. Repairs (work completed to fix damage or deterioration to a property) and maintenance (work completed to prevent deterioration to a property) should be claimed as an immediate deduction in the year an expense occurred. However, any capital improvements (work which improves the condition or value beyond its original state at the time of purchase) must be claimed as a capital works deduction or as plant and equipment depreciation. If you’re preparing your tax return, it’s important to seek advice from an expert. Quantity Surveyors are recognised by the ATO as one of a few professionals with the necessary knowledge to calculate construction costs for depreciation purposes. Alongside your Accountant, they can provide guidance to steer you on the right path to ensure your claim is correct and you receive the best possible deductions. This also means you’ll have the adequate evidence necessary should the ATO question any of your claims.

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Discover the tax depreciation deductions your hotel accommodates

BMT team — Thu, 04 Feb 2016 22:27:26 +0000

A recent property outlook by Colliers International and JLL Hotels and Hospitality Group has predicted that 2016 will be another robust year for Australian hotel owners. According to John Kenny, the Chief Executive Office of Colliers International Australia and New Zealand, strong consumer confidence is driving demand resulting in increased hotel real estate activity during 2015 and this is expected to continue in 2016. “Confidence is having a positive impact across the property sector and this optimism is starting to flow through to several of our occupier markets, as businesses become more confident,” he said. As demand for hotel properties grow, it is important that owners of these types of properties understand the tax depreciation deductions they are entitled to claim. Often the owners of these types of properties fail to claim all of the tax depreciation deductions they are entitled to. By failing to take advantage of the maximum deductions available, hotel owners could potentially be missing out on thousands of dollars. What is tax depreciation and how will it assist hotel owners? The Australian Taxation Office (ATO) allows the owners of income producing properties to claim tax depreciation deductions relating to the wear and tear of the building structure and the plant and equipment assets it contains. By claiming tax depreciation, hotel owners essentially will reduce their taxable income, therefore they will pay less tax. What’s more, the fee to obtain a tax depreciation schedule outlining all of the deductions available to be claimed is 100 per cent tax deductible. View a detailed case study on our website and see the difference a tax depreciation schedule can make to a hotel owner’s cash flow. Learn more: Tax depreciation that’s more accommodating Below are just some examples of the tax deductible items hotel owners may be able to claim: Air conditioners Carpets Furniture Laundry assets (in rooms) Swimming pool assets Beds and bedding Ceiling fans Safes Tennis court nets Blinds Heaters Refrigerators Televisions Beer dispensing equipment Crockery and cutlery Hot water systems Fire extinguishers Spa bath pumps Trolleys To learn more about the depreciation deductions you can claim for your hotel, speak to one of our expert staff on 1300 728 726 today.

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