The Office Market Crown is Set to Move to Melbourne

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SYDNEY HAS traditionally claimed to be the largest office market, with the greatest office space take-up each year.

However, more corporate tenants leased space in Melbourne during the second half of last year, then any other capital city. In fact … 110,000 sqm more space than they actually vacated. [Read more…]

More Vital Accounting Tips For Commercial Property

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AS COMMERCIAL PROPRTY investors, managing finances can be one of the most important aspects of ownership. No matter how many buildings you own, you still have to run your business and finances accordingly. [Read more…]

You Need to Look Behind The Economic Data

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A NUMBER of journalists and economic pundits seem to have been focussing solely upon the latest GDP figures.

However, the recent NAB monthly business survey appears to contradict concerns about the shaky household consumption sector – where the main concerns seem to relate to past issues.

Mainly things like … the end of the mining boom, resulting in a collapse of wage growth. [Read more…]

Commercial Loans With No Financials – Is It Possible?

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TRADITIONALLY, for any business or commercial loan, most lenders will require at least two year’s past tax returns and financials to establish servicing capacity.

For some borrowers, this is either not desirable or not possible. And so, here is a summary of several loans that could be available for such a borrower; plus how those loans may also apply to you, as a commercial investor. [Read more…]

4 Tax Tips for Commercial Property Investors

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AS THE END of the financial year approaches, commercial property players should know their tax implications – especially first-time commercial property investors, who need to be aware of the key differences for owners and tenants. [Read more…]

Removing Budget Confusion Over Claiming Depreciation

THE 2017 FEDERAL BUDGET (handed down by Treasurer Scott Morrison on Tuesday 9 May) includes proposed changes, which will affect residential property investors Australia-wide.

At this stage, our understanding is that depreciation claims relating to commercial properties won’t be affected. This is good news for anyone who owns a commercial property. [Read more…]

Underquoting Laws Change

UNDERQUOTING can take place whenever a real estate agent misleads a potential buyer about the likely selling price of a property – be it for commercial or residential real estate.

For example: When a property is promoted at a price that is lower than its estimated selling price, the seller’s asking price or at a price that the seller has already rejected. [Read more…]

Understanding Total Returns


ONLY RECENTLY, I shared some thoughts with my Mentor group. And they related to the Total Returns investors tend to expect from commercial property.

Here is a graph that appeared late last year in the Australian Financial Review. And it depicts the combination of Income Return and Capital Growth. [Read more…]

Depreciation Can Be a Cash Cow for Farmers

MANY COMMERCIAL PROPERTY investors will also own a rural property. However, they are often not taking advantage of the same depreciation benefits claimed for their investment properties. Did you know that …

You could claim $149,187 from your rural property?

The most recent Commonwealth Bank Agri Insights Report suggests that investment in Australian rural properties remains strong.

The report revealed that investment intentions have strengthened among cotton, beef, lamb, summer grain and wool producers, while horticultural investment intentions are at their highest level to date.

Adding to the expected increase in production, the report projects that a significant proportion of farmers intend to spend more money on items used on their properties. 25% of those surveyed nationally plan to purchase plant and equipment items, while 38% planned to spend on fixed infrastructure.

While BMT Tax Depreciation experienced substantial growth in the number of depreciation schedules requested by agricultural property owners over the past two financial years (a 36% increase during 2014-2015 and a 51% increase during 2015-2016), many farmers are still failing to consult with a specialist Quantity Surveyor to ensure their claims are maximised.

Given that farmers can experience times of financial hardship (particularly during droughts, floods or fluctuations in the price of goods being sold) the additional cash flow that depreciation claims can deliver to rural property owners is often vital.

 Here is an example …

To demonstrate the difference that depreciation claims can make for farmers, we looked at how BMT helped the owner of one dairy farm.

The farmer purchased a property for $1.75 million and on settlement they requested a depreciation schedule. A detailed site inspection completed by our expert team discovered they could claim deductions for the assets outlined in the table.

The table also shows the first full financial year deductions the dairy farmer could claim.

In the first full financial year alone, BMT found $149,187 in depreciation deductions for the assets listed.

As a dairy farmer, you are also entitled to claim additional capital works deductions for the barn and a homestead.

In total, the owner of a typical dairy farm with these assets and structures could expect to claim between $850,000 and $1.1 million over the life of the property.

Incentives outlined in the 2015 budget for primary producers mean that farmers are entitled to write-off a number of assets immediately.

This includes fences, dams, tanks and irrigation channels. However, the Australian Taxation Office does stipulate additional rules if owners are depreciating second-hand assets.

Bottom Line: As you can see, it’s vital to seek expert advice and to obtain a comprehensive depreciation schedule to ensure deductions are correct and maximised based on the individual circumstances and requirements of the property owner.


4 Steps to Finding Your Ideal Commercial Finance Facility

IN MY EXPERIENCE, most seasoned property investors seem to have a good idea of how to structure a home loan and what to look for.

However, the complexities of commercial property and the wide array of commercial loan products mean it can be a little more difficult for commercial investors.

As a result, many get trapped in loan products that are not appropriate to them, which can be very expensive.

What followings will help lay out some steps required to ensure you are making the right decision with your commercial loan product; and, at the same time, avoid the costly mistake of going into a product that doesn’t suit your needs

1. Determine your plan for the property

The right commercial finance option should be consistent with your future investment plans. And therefore, you first need to figure out what you want out of the investment, before looking for the finance solution – rather than the other way around.

Perhaps some questions to ask yourself might include:

  • Do you wish to hold your investment for the long term or just for a period before selling?
  • Are you an active investor who regularly buys and sells or a passive investor who will look to slowly acquire?
  • Are you wanting to be aggressive or conservative?

2. Prioritise your loan requirements

Once you have a good idea what your investment plans are, you can then decide what your main priorities are.

For example: If you are wanting maximise return on equity and have an aggressive growth strategy …having a higher loan to value (LVR) ratio for your investment may be more important, than obtaining the cheapest facility.

Furthermore, if you are looking at a long term hold strategy, a longer loan term may be preferable to a shorter term – even if this means a higher interest rate.

3. Consider Your Circumstances

While you have a wide range of products available, most loan applicants are able to obtain funding – provided they have sufficient equity and the property is acceptable.

Commercial loans are generally priced for risk – which means the riskier the transaction, the higher the pricing.

When you consider your strategy, it is useful to have some awareness as to where you sit in terms of risk profile. If you are pushing the envelope with debt amounts or security type, your priorities need to be more aligned with finding the facility that suits.

On the other side of the coin, if you are a high net-worth investor with a low risk transaction … you may have significant bargaining power to obtain the most attractive terms you can. And it is advisable to make sure you ARE getting the best terms possible.

4. Get the Right Advice

As a commercial property investor, the terms can be a little more complex. So, it is important you have a competent team around you in the area of tax, legal and financial advice.

A commercial credit advisor can assist with tailoring the right loan product and structure to suit your investment goals.

However, it is important your borrowing structure is set up correctly from the start.

Bottom Line: Your financial structure is just like a chain … where any weak links can be very costly. Therefore, it is well worth the time, effort and money to obtain good advice before investing.

Going through the above steps will go a long way towards ensuring that you choose the right commercial loan for you.


Common Property Deductions for Commercial Strata-title Owners

AN ESSENTIAL PART of ensuring commercial property owners claim the maximum depreciation for their property is taking advantage of any common property deductions which may apply.

Owners of all types of commercial property owners are entitled to claim deductions for the wear and tear that occurs to the building and its fixtures. Depreciation deductions fall under two classifications:

  • Capital works deductions (division 43) for the building structure
  • Plant and equipment deductions (division 40) for the easily removable or mechanical fixtures and fittings found within the building

If a property such as an office suite, industrial unit, or warehouse in a multi-unit complex is purchased in a development controlled under a strata-title body (or a strata title scheme), additional depreciation deductions will apply.

This is because owners are entitled to claim a portion of the depreciation for structures and assets contained within the common, shared areas.

Australian Taxation Office Tax Ruling 2015/3 provides clarification as to how common property is treated for tax purposes including detailed definitions of the types of strata-title ownership, which are deemed eligible.

Common property areas and shared infrastructure in commercial buildings which may result in additional capital works deductions for owners who purchase a lot in a strata title building include:

Some examples of plant and equipment assets found in common areas of commercial properties which can be claimed as a depreciation deduction include:

It is important to note that owners can only claim common property deductions for their portion of interest in the structure and assets contained. This is determined by their individual unit entitlement as per the strata plan.

However, when claiming plant and equipment assets, the deductions can be quite substantial, particularly as depreciation rules (such as immediate write-off and low-value pooling) can be applied.

The following table provides examples of the deductions BMT Tax Depreciation found for the owners of two commercial property types purchased via a strata-title arrangement.

Bottom Line: Apart from engaging a Tax Depreciation specialist, investors considering purchasing a lot within a strata-titled commercial building should also seek professional advice from their Accountant and Solicitor.