Commercial building owners remain unaware of the taxation benefits their property can generate. One of the most beneficial, yet often missed deductions available is building depreciation.
As a building gets older and items within it age, they depreciate in value. The Australian Taxation Office (ATO) recognises this and allows property investors to claim deductions relating to the wear and tear on buildings and the fixtures and fittings within.
According to Bradley Beer, property expert and Managing Director of BMT Tax Depreciation, “claiming depreciation is the key to increasing cash flow on commercial properties.”
Building write-off can be claimed on the structure of a commercial building so long as construction commenced after the 20th of July 1982. In cases where construction commenced before this date, depreciation can still be claimed on fixtures and fittings.
“Many commercial property owners assume they are unable to claim depreciation on their property, or receive significant deductions because it is too old. However, there are still significant depreciation deductions available on the fixtures, fittings, plant and equipment contained within the property,” says Bradley.
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.
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.
Smart commercial property owners, commercial property tenants and business owners want to improve their cash flow. Claiming depreciation can reduce the tax paid for any commercial property at tax time.
BMT Tax Depreciation provide three valuable apps every business or commercial property owner should be aware of. Let’s take a look at how these apps can help you.
1. The BMT Tax Depreciation Calculator
This app is really handy when you are looking to purchase any new property, whether it’s a commercial office, an industrial building, a warehouse used for manufacturing or a residential investment property.
The BMT Tax Depreciation Calculator allows investors to get a quick depreciation estimate of the deductions that will become available for any property once it becomes income producing.
To use the calculator, investor’s only need to have some basic information about the property, including the property type, the construction type, quality of fishing, the floor area of the property in square metres, the estimated year of construction, when the property was purchased and the nearest major city.
Once the calculate button has been selected, the calculator will provide investors with an estimate of the minimum and maximum deductions they can claim for the first five years of owning the property.
To download the app for iPhone or Android devices, click here.
What may commercial properties be hiding from tenants?
Property depreciation is mostly claimed by the owner of an income-producing property. It is for this reason that many commercial tenants often miss out on the hidden cash available to them through depreciation.
Commercial tenants can claim depreciation deductions based on any fit-out or plant and equipment assets that they add to the property.
Tenants can claim depreciation deductions on all fit-outs while the owner of the commercial property is simultaneously able to claim a deduction on the building and any plant and equipment items that they own.
Dependent upon lease conditions, if a tenant vacates a building and does not remove the fit-out from the building at the end of their lease, the owner of the property may be able to claim any remaining depreciation. However if a tenant’s lease stipulates that the property must be returned to its original condition at the end of the lease, then the tenant can benefit from claiming any remaining depreciation on the items removed and scrapped.
It is important to consult a qualified Quantity Surveyor when dealing with commercial property depreciation to ensure that not only are maximum deductions achieved but that they are claimed correctly.
For more information on commercial property depreciation, visit BMT Tax Depreciation’s new commercial depreciation page by clicking here.
Bradley Beer (B. Con. Mgt, AAIQS, MRICS) is the Managing Director of BMT Tax Depreciation. Please contact 1300 728 726 or visit www.bmtqs.com.au for an Australia-wide service.
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.
Are you planning to make a technology purchase?
The end of financial year makes many people think about tax and hurriedly scramble to organise deductible expenses in time. At the same, savvy large technology retailers and department stores hold tempting sales. It is very easy to get caught up in the frenzy and make a purchase you might regret. A little groundwork can leave you ready for a win-win situation – you buy in time for the tax benefit, find a good deal at the sale and make sure you have what your business needs so you are left with a device or program that you are happy to use.
Where do I start?
Start by thinking about your business. What are you doing now that would be easier with new technology? What are your competitors offering that makes smart use of technology?
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.
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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