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Six depreciation questions to ask yourself this tax time

BMT team — Tue, 28 May 2024 05:53:56 +0000

With tax time fast approaching, here are six questions you should be asking yourself to ensure you’re getting the most out of your investment property. 1. What are some common deductions I’m entitled to as a property investor? As a property investor, you’re entitled to a range of tax deductions. These will help lower your taxable income and make owning an investment property more viable, particularly if you own a negative cash flow property. Some of the tax deductions available to investors include deductions on council rates, the interest from a mortgage, property management fees, land taxes, strata fees, maintenance costs, insurance, accounting fees and depreciation. Of these deductions, depreciation is the most often missed. This is because it is a non-cash deduction. That is, the owner does not need to spend any money to claim it. In fact, research has shown that 80 per cent of property investors are missing out on the depreciation deductions they’re entitled to. However, given that investors can claim an average of $9,000 – $15,000 in deductions in the first full financial year alone, this is a deduction that should not be overlooked. A BMT Tax Depreciation Schedule outlines all the deductions you can claim for your property. It lasts for forty years and the fee for preparing it is 100 per cent tax deductible. 2. I’ve bought an investment property in the last few months – can I make a claim this tax time? If you haven’t owned the property for long and it’s only been income producing for a few months in the last financial year, you will be able to make a partial year claim. The Australian Taxation Office (ATO) allows investors to make a claim for depreciation based on the amount of days a property was available for lease. This could be if you’ve only recently purchased an investment property and only have one month to claim for, or you use your home as a holiday rental for part of the year. A BMT Tax Depreciation Schedule makes a partial year claim like this easy for you and your Accountant. 3. Do I need to update my tax depreciation schedule? If you’ve made any updates to your property in the past financial year, such as a renovation, it’s a good idea to get in touch with your Quantity Surveyor to see if you will require an updated depreciation schedule. It’s important to be aware that there is a difference between a repair and a capital works improvement as this will affect your claim. The cost of any repairs can be claimed in full in the same financial year they are completed. An improvement, on the other hand, is when you improve the condition of an item or property beyond that of when it was purchased. Such improvements are capital in nature and must be depreciated over time. For this reason, if you’ve made any renovations or improvements to your property in the last financial year, you should seek the advice of a property depreciation specialist or Quantity Surveyor to ensure it is claimed correctly. An updated tax depreciation schedule may be required after a renovation to capture all newly installed plant and equipment assets or capital works expenditure. 4. Am I maximising the deductions for my property? It’s one thing to be claiming deductions, but are you maximising them? A Quantity Surveyor specialising in depreciation will be aware of all the techniques you can make use of to maximise and accelerate the deductions you’re entitled to. As well as identifying assets that others may miss, they will make use of tools such as low-value pooling, scrapping and split reports to maximise the deductions you’re legally entitled to and put more money back in your pocket sooner. 5. Can my Accountant organise my depreciation deductions? An Accountant should recommend that you claim depreciation, organise a schedule on your behalf or refer you to a Quantity Surveyor. They will however not be able to estimate construction costs or provide you with a tax depreciation schedule. Only a qualified Quantity Surveyor can do that. Quantity Surveyors are one of the few professionals recognised by the ATO to have the appropriate construction costing skills to estimate building costs for depreciation. However, not all Quantity Surveyors specialise in tax depreciation. Only a tax depreciation specialist such as BMT can be relied on to maintain detailed knowledge of all current ATO tax rulings relating to depreciation. Once you have a Tax Depreciation Schedule completed, your Accountant can input these deductions into your annual income tax return. 6. I’ve only just found out about depreciation. Does this mean I’ve missed out on past years’ deductions? Investment property owners often enquire about a property they have owned and rented for a number of years but have not claimed depreciation deductions for. The ATO allows tax returns to be easily adjusted for two years after the initial submission. This enables property owners to recoup some of the deductions that may have been missed. It is important to note that a separate application will need to be submitted for each financial year requiring an amendment. Income, depreciation and other claims made will impact the outcome of each tax return. In the situation where an investor has missed or not maximised their claim in previous years, the depreciation schedule can be tailored within the eligible years. To start claiming or maximising your depreciation deductions with BMT, request a quote.

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Tax return dates Australian property investors must know

BMT team — Thu, 18 Jan 2024 00:42:41 +0000

Missing a tax deadline is not only stressful but can set a tax return back and potentially result in fines or legal penalties. Never miss an important tax date again by adding the following dates to your 2024 calendar. 2024 key tax dates Tax return lodgement dates vary between individuals, companies, trusts and partnerships. The key factors that determine an individual or entity’s relevant return date is the amount of their tax liability, entity size and if they lodge their tax return themselves or do so through an accountant. January 30 February 28 March 31 May 15 June 5 June 30 October 31 December 1 How to keep track of income and expenses throughout the year January 30 Large and medium trusts with a total annual income of more than $10 million in the latest year lodged and where the trust was taxable in the previous year of lodgement must lodge their tax returns on this date. February 28 Large and medium trusts with a total annual income of more than $10 million in the latest year lodged, where the trust was non-taxable in the latest year lodged, must lodge their tax returns on this date. This lodgement date includes newly registered large and medium trusts. Subsidiary members of a consolidated group that exited the consolidated group in the financial year, and new registrants of head companies of consolidated groups must lodge their tax return by this date. March 31 Individuals, partnerships and trusts with a tax liability of $20,000 or more must lodge their tax returns on this date. This does not include medium or large trusts. May 15 If an investor lodges their tax return via an accountant, the previous financial year’s return must be lodged by this date. Tax returns for all remaining individuals and trusts are also due on this date. Non-profit organisations with a requirement to lodge and which haven’t been allocated an earlier lodgement date must also lodge their tax returns by this date. This includes new registrations and entities not eligible for the 5 June concession. New registrants, excluding large and medium taxpayers, head companies of consolidated groups and SMSFs must also lodge their tax return by this date. June 5 Although 5 June is not an official lodgement date, the ATO allows lodgement of tax returns past the lodgement due date of 15 May for individuals, partnerships and trusts who meet the necessary criteria. You do not need to apply for a deferral to receive the 5 June concession date. This concession allows the tax returns to be lodged by 5 June without penalty, provided any payment required is also made by this date. June 30 The end of the financial year is a key tax date that should be marked in everyone’s calendar. Taxable income and expenses are measured in each financial year and 30 June signals the end of the formal financial year. Investors are encouraged to pay all the expenses they can, before the end of the financial year to ensure the best return. Where possible, expenses such as interest, insurance, tax depreciation schedules and other ongoing expenses should be pre-paid before this date, to ensure that they can also be claimed in the same financial year of payment. October 31 If an investor is lodging their tax return through the ATO’s online MyTax portal, they must lodge the tax return of the previous financial year by October 31. The same date generally applies to all self-lodged returns including partnerships, self-managed super funds, trusts and sole traders, unless lodged through a registered accountant or otherwise advised. Entities with one or more prior year tax returns outstanding as of 30 June 2024 and other entities who have been advised to lodge early must lodge their tax return by this date. December 1 Companies that are not full self-assessment taxpayers must lodge their tax returns by this date. How to keep track of income and expenses throughout the year Be prepared and ensure a stress-free tax time by keeping diligent record of all income and expenses throughout the financial year. Keeping track of income and expenses with an investment property is easy with a MyBMT account. The various tools and features available on a MyBMT account, helps thousands of investors record and track investment property related income and expenses, simplifying the process of sharing expenses with their accountant. Accountants and Property Managers can access records and manage various properties on a centralised MyBMT account. BMT Tax Depreciation is ATO compliant and works closely with accountants to ensure maximum property depreciation deductions for each client. To maximise the property depreciation tax deductions on your investment property Request a Quote or contact the BMT Team on 1300 728 726.

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How property investors can prepare for the new financial year

BMT team — Thu, 06 Jul 2023 05:56:58 +0000

With the arrival of the new financial year, property investors have a prime opportunity to assess their investment strategies and make smart financial decisions. One important aspect to consider is the use of depreciation deductions, which can significantly improve the profitability of an investment. In addition to depreciation, there are several other strategies which can help property investors enhance their investment returns. In this article, we explore how the following can help investors prepare for the new financial year: Understand depreciation and the importance of claiming Engage a quantity surveyor Evaluate property improvement opportunities Review investment loan structures and interest rates Seek expert financial advice 1. Understand depreciation and the importance of claiming Depreciation is the natural wear and tear of a property and the assets within it. The Australian Taxation Office (ATO) allows owners of income-producing properties to claim depreciation as a yearly tax deduction. Depreciation is claimable on a building’s structure and permanent assets, referred to as capital works deductions (Division 43). Depreciation is also claimable on the easily removable or mechanical assets, referred to as plant and equipment depreciation (Division 40). Residential houses generate forty years of capital works deductions which are available from the construction completion date and depreciate at a rate of 2.5 per cent per year unless the property commenced construction before 26 February 1987 and after 18 July 1985, in which case the rate is 4 per cent per year. Plant and equipment assets are depreciated over their effective life, with the rate of depreciation determined by the investor’s chosen method: diminishing value or prime cost. Investors can select the diminishing value method, which allows higher deductions earlier in the asset’s effective life, or the straight-line or prime cost method, which distributes deductions more consistently throughout the asset’s effective life. Changes to depreciation legislation in 2017 mean owners of second-hand properties are no longer eligible to claim deductions for previously used plant and equipment assets if the property is purchased after the 9th of May 2017. This doesn’t affect brand-new properties or newly purchased assets. By claiming depreciation, investors can reduce their taxable income, leading to an improved tax return and improved cash flow. 2. Engage a quantity surveyor Understanding depreciation and the importance of claiming is important, however, it’s also important to engage a qualified quantity surveyor, such as BMT Tax Depreciation. Quantity surveyors are one of the few trained professionals that hold the training required to accurately calculate construction costs. A quantity surveyor will identify all depreciable assets within a property and determine their depreciable value. Their expertise and knowledge of the latest legislation changes will ensure property investors maximise their deductions compliantly. BMT Tax Depreciation conduct physical site inspections, so that all schedules are maximised and fully compliant. Our data from inspections show that 66 per cent of residential investment properties have had some form of renovation or addition that qualify for depreciation. 3. Evaluate property improvement opportunities The new financial year presents an excellent opportunity for investors to assess an investment property for potential improvements. Investors should consider renovations or upgrades which could enhance the property’s value, increase rental income, or improve energy efficiency. These improvements will likely qualify for additional depreciation deductions. It’s important to keep in mind that different improvements will generate varying deductions in both divisions. Investors should consult their quantity surveyor or accountant to determine which improvements will best meet their goal intention, whether this is to increase deductions or to complete surface-level improvements to increase rent. 4. Review investment loan structures and interest rates Investors can take advantage of the new financial year by reviewing their investment loan structures and interest rates. Consulting a mortgage broker or financial adviser to explore opportunities for refinancing or renegotiating lower interest rates can reduce interest expenses and improve cash flow while also increasing the overall return on an investment. Investors should consider whether restructuring an investment loan, switching to a different lender or renegotiating terms can better align them with their investment goals. For instance, an interest only loan with offset accounts could reduce repayments while interest rates are comparatively high. 5. Seek expert financial advice Navigating the complexities of property investment and taxation requires professional guidance. Investors should seek advice from a qualified accountant, financial adviser and quantity surveyor who specialises in property depreciation. These professionals will provide personalised strategies tailored to an investor’s specific situation, ensuring compliance with tax laws while maximising deductions. By taking a proactive approach, staying informed, and leveraging professional expertise, property investors can position themselves to successfully reach investment goals in the new financial year. Property investors wanting to prepare for the new financial year by claiming maximised depreciation should get in touch with BMT on 1300 728 726 or Request a Quote.

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Benefits of partial year depreciation deductions

BMT team — Sun, 20 Nov 2022 23:00:56 +0000

When property investors are preparing their annual income tax return, it’s important to organise a tax depreciation schedule for any recently purchased properties. Even if you have purchased a property in the lead up to the financial year and only owned it for a short period of time, there are still depreciation benefits. Partial year depreciation deductions can be maximised by your quantity surveyor by applying a pro-rata depreciation calculation, resulting in extra cash for you. In this article we will explore: Partial year depreciation deductions Immediate write-off Low-value pooling Talk to an expert Partial year depreciation deductions Investors can claim pro-rata depreciation deductions for the period their property is rented out or is genuinely available for rent. That is, the property is given broad exposure to potential tenants and considering all the circumstances tenants are reasonably likely to rent the property. This is particularly important for holiday homeowners as the property may only be rented during peak seasons like Christmas and New Year. If you use your holiday property for both private and income-producing purposes, you can only claim a deduction for the period where it is income-producing. Partial year depreciation deductions may also apply to investors who have previously used the property as a primary place of residence. Be sure to speak to your quantity surveyor to ensure you claim correctly. BMT Tax Depreciation use legislative tools to make partial year claims more beneficial to new investment property owners. Methods used in pro-rata depreciation calculations include applying the immediate write-off rule and adding eligible assets to a low-value pool. Immediate write-off An immediate write-off applies to any item within an investment property with a value of less than $300, regardless of how long the property has been owned and rented. As an investor, you’re entitled to write-off the full amount of the asset in the first year. For example, if you purchase a new smoke alarm valued at $50 for your investment property, you can claim 100 per cent of the cost in the year of purchase. 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. Item can be depreciated at 18.75 per cent in the first year and 37.5 per cent each year thereafter. This amount can be claimed in full in the relevant financial year regardless of how long the property was held for, even if it was one single day. Two types of depreciable assets can be allocated to a low-value pool: Low cost asset: a depreciable asset that has an opening value of less than $1,000 in the year of acquisition Low value asset: a depreciable asset that has an opening value of greater than $1,000 in the year of acquisition but the value after depreciating over time is now less than $1,000. This will only apply if you’ve previously used the diminishing value method. For example, if you purchase a hot water system worth $1,500 it can be depreciated using the diminishing value method. Once its depreciable value falls beneath $1,000, it will be added to the low value pool as it’s considered a low value asset. On the contrary, if the hot water system cost $900 at the time of purchase it would be automatically added to the pool as a low cost asset. It’s important to note that once an item is placed in a low-value pool, it cannot be taken out. Assets which form part of a group with a total cost exceeding $1,000 can cause confusion for property investors so it’s important to speak to an expert to clarify what can and cannot be claimed in a low-value pool. Talk to an expert To ensure all depreciation deductions are claimed correctly for the period 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 depreciation claim that is calculated pro-rata based on the time the property is rented.

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7 tax tips for small business owners this financial year

BMT team — Fri, 12 Aug 2022 02:36:00 +0000

The Australian small business sector generates millions of jobs for the local economy. The current environment is challenging for many businesses and it’s more important than ever for owners to maximise their cash flow this financial year. In this article we will explore 7 tax tips for small business owners: What is a small business? Strong record keeping and tracking split expenses Claim pre-paid expenses Don’t forget the Small Business Income Tax Offset Small business capital gains tax concessions Deducting ‘bad’ debt Increase depreciation deductions Key points: A small business is identified as a business with an aggregated annual turnover less than $10 million Strong record keeping and tracking split expenses is key Maximising cash flow is easier than ever with the increased instant asset write-off What is a small business? From a taxation standpoint, a business with an aggregated annual turnover of less than $10 million can be classed as a small business and take advantage of the several tax concessions. A business’s geographical size or number of employees doesn’t determine whether it’s a small business. Strong record keeping and tracking split expenses The number one rule for any small business is to track all expenses incurred, and income earned during the financial year. The Australian Taxation Office (ATO) requires records to be kept for five years. Expenses may include things like replacing assets, advertising costs or business travel. Every small business owner must keep their personal expenses separate to business-related expenses. For example, if a business owner uses a vehicle for both personal and business use, expenses must be apportioned appropriately. Claim pre-paid expenses There are a number of common small business pre-paid expenses that can go beyond the current financial year including insurance premiums, rent, a tax depreciation schedule and memberships. If any small business owner has made any pre-paid expenses, they can claim this expense in the financial year it occurred. Don’t forget the Small Business Income Tax Offset The small business income tax offset offers small businesses a tax offset of up to $1,000 per year. This offset is currently available for unincorporated small businesses with an aggregated turnover of less than $5 million from the 2016-17 financial year and onwards. This can be particularly beneficial for businesses in the start-up phase. Small business owners don’t need to apply for the offset as the ATO will work this out from their tax lodgement Small business capital gains tax concessions When a business sells an active asset and makes a profit, they must pay capital gains tax (CGT) on this capital gain in the same financial year. Small business CGT concessions can significantly, sometimes completely, reduce the CGT a small business is required to pay for an active asset. There are four key concessions available for eligible small businesses: the 15-year exemption, 50 per cent active asset reduction, retirement exemption and small business roll-over. Deducting ‘bad’ debt An unpaid debt to a business is deemed as a ‘bad’ debt. This type of debt can be a tax deduction for the business if it was included in their assessable income in the present or previous income year. There are several conditions that must be met for a debt to qualify as a bad debt. If it does qualify, it can be written off as a tax deduction. Increase depreciation deductions It’s crucial for small business owners to claim depreciation deductions to maximise their cash flow. If a small business owner is a tenant of a property, they shouldn’t dismiss claiming depreciation. Commercial tenants can claim deductions for their own assets and fit-out. With temporary full expensing available until the end of the 2022/23 financial year, it’s never been easier to claim more this tax time. This write-off allows any small business with an aggregated annual turnover of less than ten million dollars to instantly write-off any plant and equipment asset of any value. Some common assets a business could claim as an instant write-off include business vehicles, machinery, new software, point-of-sale devices and fit-out assets such as shelving, flooring and interior design. Other available incentives include the backing business if they have an aggregated turnover of less than $500 million and available in the 2019-20 and 2020-21 income years. Also, the immediate write off of the small business low value pool balance in full under the temporary full expensing rules. A tax depreciation schedule is an essential for unlocking lucrative depreciation deductions. A schedule lasts the lifetime of the property (forty years) and the fee is 100 per cent tax deductible. Consult with a commercial depreciation expert BMT Tax Depreciation has been trusted by commercial property owners and tenants Australia-wide for over 20 years. We have completed tax depreciation schedules for many small businesses across all industries. A BMT report takes all business incentives into account and applies them where applicable. To learn more about claiming depreciation and the commercial tax depreciation services BMT offers, Request a Quote or contact the team on 1300 728 726.

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Tax time 2021 and tips for the new financial year

BMT team — Thu, 13 May 2021 01:30:42 +0000

In this article we will explore: Maximise your tax return Understand loan interest and how it can be claimed at tax time Borrowing expenses Repairs, maintenance and capital improvements Don’t forget to claim depreciation at tax time Stay compliant at tax time Prove it all with records Maximise your tax return The Australian Taxation Office (ATO) performed a review of individual tax returns last year and found that an astounding 90 per cent of investment property owners were making mistakes in their tax return. The most common errors were around loan interest, borrowing expenses, repairs and improvements. If you’re a property investor, here are some tips for the new financial year that could help you avoid mistakes and save you thousands next tax time. Understand loan interest and how it can be claimed at tax time If you obtain a loan to purchase an investment property, the interest charged on that loan can be claimed as a tax deduction. However, there are some rules around this: the property must have been rented, or genuinely available for rent, in the income year the deduction is claimed. if the property was used for private purposes at any time throughout the year, the interest will be apportioned accordingly. if the loan was used for more than one purpose, such as to buy the property and a car, the interest must be apportioned into deductible and non-deductible amounts. Don’t forget, you can deduct interest on loans for other purposes including: financing renovations repairing the property purchasing assets, such as air conditioners. You can also pre-pay next financial year’s interest in a lump sum and claim it at tax time this financial year. Tip: Ensure you can provide proof that the property has been genuinely available for rent for vacant periods for your investment property. Borrowing expenses Borrowing expenses are those you directly incurred when taking out your investment property’s loan. If over $100, they can be claimed over the course of five years. If under $100, the full amount can be claimed in the same financial year. Borrowing expenses include: lenders mortgage insurance stamp duty charged on the mortgage title search fees mortgage broker fees valuation fees loan establishment fees costs for preparing and filing mortgage documents. They don’t include: capital costs involved in buying your property such as conveyancing fees, legal fees, title search fees, valuation fees, pest and building inspection fees incurred when purchasing the property and stamp duty the principal amount you borrow for the property loan balances for the property interest expenses (these are claimed separately). For more information on what can and can’t be claimed at tax time as a borrowing expense, visit the ATO website. Repairs, maintenance and capital improvements When it comes to tax deductions, there are differences between repairs, maintenance and capital improvements. Repairs are generally made to fix the wear and tear or damage that occurs to your rental property. An example of a repair is fixing a broken kitchen cupboard. Maintenance generally involves keeping the property in a good condition. If you’re preventing or fixing deterioration of an item, it’s likely to be maintenance. An example of maintenance would be painting an interior wall. Capital improvements occur when the condition or value of an item is improved beyond its original state at the time of purchase. Structural additions and renovations like adding a wall are considered capital works deductions. Adding removable or mechanical items like carpet, hot water systems and stoves are considered plant and equipment. Repairs and maintenance costs may be fully tax deductible in the year they were paid, so long as the expense occurred as a result of your property being genuinely available for rent. Capital improvements must be depreciated or claimed as capital works deductions, or as plant and equipment deductions, over time. If you made an initial capital repair or improvement to a property after purchase but before renting it out, you can’t claim the cost as a standard tax deduction. These costs instead will be classed as capital works and claimed at 2.5 per cent per year over forty years. Don’t forget to claim depreciation at tax time Research shows 80 per cent of property investors fail to take full advantage of property depreciation and miss out on thousands of dollars in their pocket. Depreciation is often missed because it is a non-cash deduction, meaning you do not need to spend any money to claim it. Last financial year, BMT found residential property investors an average first year deduction of almost $9,000. For those who haven’t been claiming depreciation, a BMT Tax Depreciation Schedule can help you claim back missed dollars and amend your tax return for the previous two financial years. Stay compliant at tax time The ATO audited more than 1,500 taxpayers with rental claims in the 2017-18 financial year and issued penalties worth $1.3 million. From 2019, the ATO plan to extend its program of audits and reviews of rental properties and more than double the number of property investor audits to 4,500. With the focus now on ‘over-claimed interest, capital works claimed as repairs, incorrect apportionment of expenses for holiday homes let out to others and omitted income from accommodation sharing’ it’s wise to ensure you are complying and working within the parameters of ATO legislation. Given depreciation is such a large deduction, it’s important that it’s claimed while maintaining full compliance. When completing a tax depreciation schedule, BMT’s specialist site inspectors complete a physical site inspection. This substantiates any depreciation claim you make. Prove it all with records Maintaining accurate records is crucial. The standard rule is that if you can’t verify it, you can’t claim it. MyBMT provides the perfect tax time solution, making it easy to track property income and expenses throughout the year. MyBMT can be used by property investors, accountants and property managers. MyBMT allows you to track your rental income and property expenses such as loan interest, insurance, rates, body corporate fees and more. You can notify […]

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Are you claiming all available tax deductions from your investment property?

BMT team — Mon, 13 May 2019 04:27:39 +0000

Are you claiming all you’re entitled to at tax time? Find out what tax deductions you can claim on an investment property and maximise your deductions this June 30. All owners of income-producing properties are entitled to claim deductions for the period a property is rented or available for rent. Here are the tax deductions you can claim: Rates and management fees Repairs and maintenance Property depreciation Ensure you claim your entitlements Be aware of CGT Rates and management fees Investors can claim immediate deductions for expenses involved in the management of their investment property, including: property management fees body corporate fees and charges accounting fees council rates land tax advertising for tenants insurances including public liability, building, contents and landlord Repairs and maintenance Repairs refers to work completed to fix any damage to an investment property, while maintenance is work completed to prevent deterioration. Repairs and maintenance can be claimed as an immediate deduction with your Accountant by providing relevant receipts. If you complete any renovations or repairs where you improve the value of the asset beyond its original state at the time of purchase, these items will need to be depreciated as either capital works or plant and equipment depreciation. To learn more, read our Maverick article regarding repairs and maintenance and capital improvements. Property depreciation Property depreciation is generally the second biggest tax deduction after interest, though it’s often missed by investors. Depreciation is considered a non-cash deduction, meaning an investor doesn’t need to spend any money to be eligible to make a claim. It sounds too good to be true, but property depreciation can make a big difference to an investor’s cash flow. Depreciation has two categories: Capital works deduction Capital works deductions (or Division 43) refers to the tax deductions for the building’s structure and items considered to be permanently fixed to the property such as kitchen cupboards, doors and sinks. As a rule, residential homes in which construction commenced after 15th September 1987 and commercial properties in which construction commenced after 20th July 1982 are eligible for the capital works deductions. Though deductions for commercial properties will vary based on the type, age and historical construction cost of the property. Plant and equipment assets Plant and equipment assets are identified as items which are easily removable from the property. These items have a limited effective life as set by the tax commissioner and can generally be depreciated over time. Examples include carpet, hot water systems and blinds. It’s important to be aware of restrictions to claiming depreciation on previously used plant and equipment found in second-hand residential properties. Read our BMT Insider article on plant and equipment deductions and legislation for more. Any income-producing property may be eligible for thousands of dollars in depreciation deductions. It’s important to get a tax depreciation schedule to ensure you claim the biggest tax refund possible. 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. Ensure you claim your entitlements A BMT Tax Depreciation Schedule covers all deductions available over the lifetime of a property to ensure you maximise your cash flow. During FY 2017/18, we found residential property investors an average first year deduction of almost $9,000. Our depreciation schedules last for the forty-year life of an investment property and can be claimed in your tax return. Be aware of CGT It’s also important to be aware of the Capital Gains Tax (CGT) implications of owning an investment property should you decide to sell the property or if you are removing and scrapping any of the plant and equipment assets contained. There are a few CGT exemptions which may apply to investment properties. To learn more, click here. By choosing a BMT Tax Depreciation Schedule, you can be assured you are choosing a report which covers you for all scenarios, including providing a capital loss depreciation schedule when required. We also recommend speaking with your Accountant for advice regarding CGT.

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What documents you need when visiting your Accountant

BMT team — Thu, 09 May 2019 05:14:49 +0000

Tax time can be daunting, but it doesn’t have to be. Preparation ahead of your tax return appointment can save you time and help maximise your tax refund. When using a new Accountant, always provide your last tax return. This will include your personal details, tax file number, income streams, tax offsets, deductions, and other relevant information previously claimed. If you’re a property investor, there are also certain documents required to ensure you claim the biggest tax refund possible. Here’s what you should prepare for your tax return appointment: In this article we will look at: Tax Depreciation Schedule Repairs and maintenance expenses Income Borrowing expenses Rental fees Insurance Rates Tax Depreciation Schedule Depreciation is a deduction for the decline in value of items as they wear and tear over time. A BMT Tax Depreciation Schedule covers all deductions available over the lifetime of the property, broken down into plant and equipment and capital works deductions. Eligible plant and equipment assets can be depreciated based on their effective life. However, assets valued less than $300 can be claimed in full in the same year, while assets valued at less than $1,000 can be tallied into a low-value pool to increase the depreciation deductions. Assets which fall into the low-value pool can be claimed at a rate of 18.75 per cent in the first year and 37.5 per cent from the second year onwards. Capital works deductions (for the building structure) can be claimed over forty years at 2.5 per cent of the total cost per year. To arrange a tax depreciation schedule, Request a Quote today. Repairs and maintenance expenses Any repairs and maintenance can be claimed as an immediate deduction with your Accountant by providing the relevant receipts and invoices. However, if you complete any renovations or repairs which are considered capital improvements (where you improve the value of the asset beyond its original state at the time of purchase) these items will need to be depreciated as either capital works or plant and equipment depreciation. To learn more, read our Maverick article regarding repairs and maintenance and capital improvements. Income Before your tax return appointment, you must prepare the income of your investment property, including the number of weeks rented and the total rent received. You can only claim rental property tax deductions for the period of the year that the property was tenanted or actively advertised as available for rent. Borrowing expenses When you first purchase your investment property the borrowing expenses involved, such as loan set-up fees, can be claimed. As outlined by the Australian Taxation Office, if your total borrowing expenses are more than $100, the deduction is spread over five years. If the total borrowing expenses are $100 or less, you can claim a full deduction in the income year they are incurred. A borrower can also claim a tax deduction for interest on an investment property loan within the same financial year because it’s an expense incurred in earning what is known as assessable income. Rental fees As an investor, you can claim any rental advertising and property management fees charged in the same year that you paid for them. Be sure to keep all receipts and rental statements to substantiate your claims. Insurance If you claim rental income on your property, your homeowner’s insurance becomes tax deductible. Other insurances that may be tax deductible include: building contents public liability private mortgage insurance. Visit BMT Insurance to get a free quote to organise your insurance. Rates As a property investor, you may be entitled to claim an immediate deduction for body corporate fees and charges, council rates and land tax.

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Ways to splash the extra cash from depreciation

BMT team — Wed, 18 Jul 2018 01:25:44 +0000

When an investor starts claiming depreciation, they can reduce their tax liability. This is because depreciation essentially lowers their taxable income, meaning they may be able to put more more money back in their pocket at tax time. For many investors, the additional savings depreciation provides them can help to reduce their loans faster, add more funds into an offset account, to put money towards a new car or a holiday, or to assist them with everyday expenses involved in holding the property. As an investor, there are smarter ways to use the extra cash you will make from depreciation. Here are just a few: Pay off your debts First things first, if you have any major outstanding debts, this may be a good chance to reduce or eliminate them. While a Financial Advisor can advise which debts you should be paying off first according to your own financial institution, things like credit card debts (which often have very high levels of interest) or personal loans could be a good thing to pay off or reduce. Diversify your portfolio Most Financial Advisors will tell you that diversifying is a great way to minimise risk and is important for long-term financial success. When you have a diverse portfolio, these different investments are likely to react differently to the same event. This means that if one area suffers, you still have a stake in another area that is growing. Ideally, this will offset significant financial losses. For example, a residential investor might look to invest in shares, bonds or even venture into the world of commercial property. Grow your portfolio Most investors will stop at one property but if you have the means, you can experience greater returns by growing your property portfolio. Carefully consider whether this works for your financial situation and fits in with your investment goals. As always, do some proper research to ensure you’re investing in the right area and the right property to maximise capital growth and rental returns. Boost your super It’s never too early to plan for your retirement. If you’d like a similar standard of living once you retire, it’s likely you’re going to need to make some voluntary payments on top of what your employer pays. This money is concessionally taxed, will generally be locked away until you retire and you’ll benefit from compounding returns over time. Do some renovations on your investment properties Is your investment property a bit run down, in need of some better appliances or just crying out for a fresh coat of paint? Well this is your chance to change that. Using the extra cash from depreciation to improve your current property is a great idea, provided you don’t overcapitalise. This could potentially boost rental returns and increase the overall value of the property. Expand your business If you’re a commercial property investor or running a business as the tenant, extra cash never goes astray. Depending on how the business is performing you could use this extra cash to expand or invest in other parts of your business. For example, this may give you the funds to upgrade your business equipment or start expanding into a new area. Consult with an Adviser Please note that these examples are general in nature and do not take into account your personal situation. As always, you should consult with your Financial Adviser when making such financial decisions to determine the best course of action for your individual circumstances.

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Smart tax tips for the new financial year

BMT team — Thu, 12 Jul 2018 23:20:23 +0000

For most people, a new financial year means time to prepare an income tax return. They’ll lodge their return, hopefully get a refund (or maybe have to pay some extra tax) and then forget about it until next tax time rolls around. For property investors, it has added meaning. It’s a great time to take stock of how your investment is performing and set some things in place to ensure you’re in an even better position next tax time. Here are five smart tax tips for this new financial year. 1. Visit your Financial Advisor If you haven’t visited your Financial Advisor in a while, make this financial year the time to do so. They’ll be able to assist in reviewing the performance of your investment and advise on whether you should set new goals or adjust your current investment strategy. It’s also a great way to get a holistic view of your finances, which can be hard to do on your own. A good Accountant or Financial Advisor will also ensure you’re claiming everything you’re entitled to as an investor. Speaking of which… 2. Make sure you’re claiming all the deductions you’re entitled to As a property investor you’re entitled to a range of tax deductions, one of which is depreciation. Considering depreciation often sees residential investors get an average of $5,000-10,000 in deductions in the first financial year alone, it’s important to take advantage of these deductions if you want success as an investor. Combined with all the other deductions you’re entitled to for your investment property, such as repairs and property management fees, these deductions really do add up and shouldn’t be overlooked. Visit BMT’s tax depreciation calculator for an estimate of the deductions you may be entitled to. 3. Be smart with renovations Are you planning on renovating your investment property in some form this coming year? If so, you should be smart about it and realise that the assets you choose can maximise future deductions. Selecting which assets to replace during a renovation can make a difference to future deductions. This is because each asset’s rate of depreciation is calculated based on its individual effective life. For example, deductions available in the first full year depreciation claim for carpets, floating timber floors and tiles differ. You can use BMT’s depreciation rate finder to calculate the effective life and depreciation rate for various plant and equipment assets. Furthermore, if you’re planning a renovation this year, you should contact a specialist Quantity Surveyor before starting work. This is important during the removal or demolition of any existing structure or fixture onsite that would have been eligible to claim deductions for depreciation (division 40) or capital works deduction (division 43). These removed and scrapped assets could entitle the owner to additional claims. An updated tax depreciation schedule may be required after a renovation to capture all newly installed plant and equipment assets or capital works expenditure. 4. Keep accurate records and receipts Your Accountant would have told you time and time again to keep receipts of things you need to claim. This advice still stands. One exception to this is if you’re ordering a tax depreciation schedule from BMT. In this case you don’t need receipts for work completed or new assets installed – this is what our site inspections are for. Accurate record keeping is essential for investors – it’s a good idea to jot down conversations you’ve had and agreements you’ve made with your Property Manager or with your tenant if you self-manage your property. This is particularly important for owners of holiday rentals, who need to have accurate records of exactly how many days their property was available for rent in the past year to make legal claims. 5. Consider how you can re-invest your tax return There’s no doubt that the best part of tax time is getting a tidy tax return. While it’s tempting to put that extra cash towards a holiday, a car or even put it into your savings, as an investor you should consider if there are better ways you can use this extra cash. For example, you could choose to reinvest this in shares, put it towards a deposit on a new investment property to grow your portfolio, or use to it renovate or update your existing investment property, which could result in a higher weekly rent and increase the overall value of the property.

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