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Reduce Fit-out Costs With Depreciation Deductions

Starting a new business can be quite daunting, particularly if you’re trying to do so within a strict budget.

On top of other initial start-up costs such as purchasing stock or merchandise, arranging insurance, budgeting for staff overheads and (if you don’t own the building) allocating funds to pay rent, there are often costs involved in installing assets to fit-out the new space before you can open the doors for business.

What commercial property tenants are often unaware of is that they are entitled to claim deductions in the form of depreciation for many of the assets installed during the fit-out of a property.

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Claim depreciation for older commercial investment properties

One of the main reasons commercial investors continually fail to take advantage of the depreciation deductions available from their property, is because they believe their property is too old to warrant making a claim.

According to Bradley Beer, the Managing Director of BMT Tax Depreciation, this myth needs to be dispelled.

“Often investors make the mistake of thinking they will not receive deductions for an older property due to the date restrictions the Australian Taxation Office (ATO) place on claiming the available capital works allowance. The reality is that any property, no matter how old the building is, will entitle its owner to valuable deductions in the form of depreciation. This is because the owner is also entitled to claim depreciation for the plant and equipment assets contained within the property,” said Brad.

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Find Out The Depreciation Available Before You Buy

Crunch the numbers for your commercial property and save

Before purchasing a commercial investment property, make sure to crunch the numbers correctly. That next bargain may actually be more affordable if property depreciation is claimed.

Astute investors will usually consider the potential return of the property, surrounding commercial infrastructure along with rental vacancy rates in the immediate area. They may also like to factor the current tenancy contract in place with historical growth.

They should also work out the tax deductible costs and other deductions involved in owning the property, such as property management fees when required, rates, interest, repairs, maintenance, fit-out costs and property depreciation.

These deductions add to the investor’s net cash return and every deductible dollar comes back to the owner at the marginal tax rate.

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Tax – Chaos or Calm

The date June 30 can mean chaos or calm depending on how well organised you are. If this year is already looking like chaos maybe it’s time to consider ways for your office to work smarter as we head towards end of financial year.

Here are a few tips to create calm from Lan Nguyen from Success Accounting Group.

1. Check for missing receipts or documentation – these definitely cause stress and chaos

To create a calmer approach to 30 June; review all necessary receipts and documentation now so that you can present your accountant and the Tax Office with a complete set of documents to substantiate your claims and support your record keeping.

2. Review your financial positioning – If your profit and loss statements are unbalanced there’s a very good chance you are too.

The difference between good bookkeeping and excellent book keeping is balance… in the numbers in your profit and loss and business and credit card bank accounts. Don’t forget to check if the interest on the car hire purchase and business loans is separate from the principle. Are they fully reconciled and all transactions recorded accurately and completely? If not, go to point #1! This is the best time of year to do a stock take and write off any obsolete stock. Check the integrity of accounts receivable and accounts payable and write off any uncollectable debts before 30 June. If none of this makes sense – talk to your accountant A.S.A.P.

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Commercial Property Depreciation

Five Facts For Commercial Investment Property Owners

What commercial property investors should consider

Commercial investment property owners are often unaware they are entitled to make a claim for property depreciation. According to Bradley Beer, the Managing Director of BMT Tax Depreciation, around 80 per cent of commercial property owners don’t take advantage of property depreciation and therefore miss out on thousands of dollars.

“Claiming depreciation is paramount for commercial property investors. A depreciation claim can provide the difference in income for owners to turn a negative cash-flow property into an investment with a positive cash-flow,” said Bradley.

To help commercial properties owners earn more from their property, here are five facts about tax depreciation to assist them in the lead up to the end of financial year.

1. What is depreciation and what can be claimed?

The Australian Taxation Office (ATO) requires investors to report any income earned from a commercial property as part of preparing their income tax assessment. Commercial investment property owners are entitled to claim depreciation. Depreciation is a deduction available due to the wear and tear of a buildings structure (capital works deduction) and its fixtures and fittings (plant and equipment items) over time. It is considered a non-cash deduction, meaning investors do not need to spend any money to be able to claim it.

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