THE FINANCIAL INDUSTRY in general (and the major banks in particular) have been under the microscope recently as a result of the Royal Commission. And that has provided a steady stream of negative headlines for the banks over the past 12 months.
As a result, the banks have instituted a number of changes including: [Read more…]
DOES THE IDEA OF BUYING commercial property instead of renting your current business premises appeal to you? Or are you undecided whether to purchase a commercial investment over a residential property for your portfolio?
It can be hard to understand the tax depreciation allowances that are available for investors of commercial property over those found for residential properties.
There are many rules which apply and the difference in depreciation found can vary significantly. By becoming more aware of commercial property depreciation, this can help you as an investor to make an informed decision.
Many investors buy commercial property in their own name or as part of a self-managed super fund or company trust and then lease the property back to the business they own.
This enables the individual tax payer or super fund company, or trust to claim the tax depreciation allowance, which can be significant with commercial property. Here’s the great thing – it is totally legal.
The building allowance refers to the decrease in value of the commercial property’s brickwork, mortar, concrete, etcetera. The date construction commenced, determines what building allowance you can claim. On non-residential properties the allowance is set at:
Note: Traveller Accommodation, and Manufacturing properties do have different dates to those shown and can be claimed at 4% from 27 February 1992.
Each year the ATO publishes a list of what assets you can and can’t claim. Commercial property owners don’t have their own list, but some assets are claimed at different rates to residential properties. For instance, carpets are claimed over an eight year period in commercial and a ten year period in residential.
There are also industry specific assets that the ATO has detailed for depreciation claims. For instance, if you own a restaurant you will be able to claim items specific to your line of business. BMT Tax Depreciation Rate Finder is an easy to use tool which can help you find out the effective life and depreciation rate for any commercial plant and equipment asset.
In a move that will help boost cash flow for owners of small businesses, the Senate recently passed legislation to extend the $20,000 instant asset write-off to June 2019. Initially introduced in May 2015, the Australian government originally allowed small businesses with an agregated turnover less than $2 million to claim a $20,000 instant asset write-off.
In March 2017, as part of Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016, the definition of a small business was extended and the $20,000 instant asset write-off was extended to include those enterprises with an aggregated turnover of less than $10 million.
During the 9th of May 2017 federal budget, the instant asset write-off was extended until the 30th of June 2018. In 2018, the federal budget proposed to extend the legislation once more and after a long delay between May and September, the extension of the legislation was passed by the Senate on the 12th of September 2018.
Building height can play a role in the amount of depreciation that can be found for the owner of a property. Taller structures tend to attract higher deductions due to the fact that there is greater capital works expenses involved in the construction of the building.
Multi-storey buildings also often have common property assets such as lifts and fire services which can result in plant and equipment depreciation being available for the owner to claim. Some commercial properties may even include swimming pools, gyms, or even less obvious items like intercom systems.
Overall, these plant and equipment items translate to additional depreciable value for the property investor.
Bottom Line: The ATO recognises Quantity Surveyors as one of only a few professions which possess the required construction costing skills to calculate the cost of items for the purposes of depreciation.
If the original costs of construction are unknown, have a qualified Quantity Surveyor, such as BMT Tax Depreciation help estimate the costs for you. A Quantity Surveyor is a qualified professional who specialises in building measurement and estimating the value of construction costs.
AS OF 1 OCTOBER 2018, Victoria has moved one step closer to a completely digital conveyancing process as all property settlements (with some exceptions) are required to be completed via PEXA (Property Exchange Australia). [Read more…]
IT IS WELL KNOWN that you can claim wear and tear on a business vehicle. But do you know exactly how much wear and tear you can also claim, on your investment property?
You see, many property investors are unaware how significant the tax depreciation deductions their investment properties hold – meaning they could be missing out on thousands of dollars. [Read more…]
AS OF 1 JANUARY 2017, Victorian land owned by an “absentee owner” is subject to an additional 1.5% Absentee Owner Surcharge. The purpose of the surcharge is to require foreign buyers, who do not pay other taxes, to contribute to government services and infrastructure in Victoria.
Although this surcharge also applies to commercial property, it was originally introduced as an attempt to manage foreign purchasing of residential real estate in Victoria – to assist with housing affordability. [Read more…]
EVERY INVESTOR would like to be in a position to pick the top and bottom of each Cycle, when it comes to commercial property.
And if you had followed things closely during last century, you would know forecasting this used to be relatively straightforward – with all the various Office markets following a fairly predictable sequence, as shown below. [Read more…]
AS AN A INVESTOR, once you start claiming depreciation, you’ll notice a big improvement in your cash flow.
That’s because depreciation effectively lowers taxable income – and that means more money back in your pocket come tax time.
For most investors, the extra cash goes into savings. Or is put towards a holiday, or a new car. Or simply used for everyday living expenses.
However, there are far smarter ways to use the extra cash you gain from depreciation. And here are just a few. [Read more…]
AS I EXPLAIN to my Mentor group, there is a certain rule of thumb for Office market vacancies around Australia.
And it’s really quite simple: For an office market to be “in balance” you really need to have a vacancy rate of between 6% to 8%.
It’s a bit like the unemployment rate. You see … a 5% unemployment rate – effectively means FULL employment – because anything lower than this … is starting to put pressure on wages. [Read more…]
LET’S USE HOTELIERS as an example. When they request a tax depreciation schedule for their property, there are usually three main scenarios:
WHEN INVESTING IN Commercial property, one of the major attractions for investors is the cashflow available. And locking in a guaranteed cashflow, via fixing your loan can be an attractive strategy.
However, there are a number of things that should be considered, before deciding to fix your interest rate. Here are some of the most important questions to ask yourself when deciding. [Read more…]
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DID YOU KNOW super fund members are some of the biggest landlords in our capital cities?
They own a share of offices, hotels, warehouses and shopping centres. The more cash in super funds, the more properties are bought – indirectly exposing fund members even to some of the most iconic office towers in capital cities. [Read more…]
