Everything You Must Know About Commercial Property Depreciation Deductions

In today’s era, entrepreneurs face many significant challenges. Professionals need to access everything immediately when business owners try to increase cash flow. But, to boost cash flow in a better way, the companies and commercial landlords have to update the depreciation schedule. So, as you read ahead you will learn more about the commercial property depreciation deductions. But, before moving ahead, let’s check out the results we got from some of our commercial clients.

Results depending on the industry

As for small workplaces, the claims for the financial year 2020 were equal to $18,004. This was quite less than the claims for the first 5 financial years, which was $58, 597. But, on the contrary, for those who own small warehouses, the claims for the year 2020 and across the first five financial years were $6,603 and $29,222 respectively. As for the results for city commercial building, the claim across five financial years was as high as $448,111.

How do professionals calculate the depreciation on commercial property?

As for the calculation, depreciation differs for different types of commercial buildings. Feel free to seek help from professionals if you are unsure about the depreciation on investment property ATO.

The first step to calculate the depreciation is classifying the buildings depending on the purpose. Later, the ATO comes up with depreciation rules for every type of category. There are many factors that can affect the rate of depreciation. These factors are applicable to buildings that fall under Division 43 and Division 40.

On the whole, the total depreciation a person can claim is divided between Division 43 and Division 40. Usually, professionals use the Prime Cost Method to calculate Division 43 depreciation. However, they use the Prime Cost or Diminishing Value Method to calculate the depreciation for Division 40 assets. Besides, Division 40 assets can come under the low-value pool based on the effective life. The classification would also matter on the maximum tax depreciation deduction done earlier.

How can a person claim property depreciation deduction?

When you need to claim the deduction, you must contact a quantity surveyor. As the professional presents a depreciation schedule, you can observe the amount you can claim every year. But, your claim would depend on the value of the commercial building. It may also vary due to the decline in the value of the income-generating assets. According to the rules of ATO, the surveyor should come up with a depreciation schedule only for buildings built after September 1989. The schedule would come into the picture even when you are unaware of the property’s construction costs.

As for the fees, you only have to pay for just one depreciation schedule. Once the surveyor coordinates with you, he would work out the assets that would depreciate in the future. The schedule is further sent to an accountant, for effective calculation of deductions. The accountant then considers the equivalent amount for the annual tax returns.

Conclusion:

If you have any questions regarding the depreciation deductions, then you need to reach out to tax depreciation professionals. In order to predict the tax depreciation investment property, you use the investment property calculator. But, if you’re an investor, who wants to maximize returns, then you could go through the depreciation reports. You can research online and avail the report which is available online. Apart from everything else, you can also seek answers for questions pertaining to capital gains.

4 Important Things That Your Tax Depreciation Schedule Must Include

A depreciation schedule has emerged as something that every individual investor must invest in. It can assist you to reduce the tax you need to pay apart from enhancing the return on investment for your property. When you decide to claim depreciation on your investment property, you will require an investment property depreciation schedule. And, the federal tax depreciation schedule must be prepared with the help of an expert quantity surveyor. The expert will be listing your entire depreciable items that may include effective life that remained in every item. The reason why it must be prepared by a quantity surveyor is that they have been recognised by ATO.

Here are some of the crucial things that your tax depreciation schedule must include:

1. Common indoor items:

A professional quantity surveyor must include common indoor items while preparing a tax depreciation schedule. You are eligible to claim depreciation on your unit’s assets. And, you can also claim for assets that you share with other units in the apartment complex. However, you will be allowed to claim your share of those assets. These common items may include fire extinguishers, AC units, and lifts, among others. You will also be entitled to claim for ventilation and hot water systems. Expert quantity surveyors from Deppro can effectively prepare your depreciation schedule and minimize your tax liability.

2. Scrapped objects:

When you carry out renovations on your property, you may be left with some assets that don’t have to use anymore. Many people tend to dump the scrapped objects sans giving any second thought. Old objects have a scrapping and residual value. You will be eligible to claim a final depreciation sum on an object that you plan to chuck away after renovation.

3. Common outdoor objects:

You can also claim depreciation on common outdoor objects. It is because any object outside the apartment does possess value to you. It may include the fences, pathways, several landscaping objects like pergolas. You can also make a claim on a shared swimming pool too. These items will find their way into your depreciation schedule. However, you may not be able to claim for every common outdoor object. Meanwhile, you must be continuously updated about the ATO depreciation rates.

4. Design professional’s fees:

It is worth noting that you may include fees you paid to your design and construction expert in your tax deductions. Your depreciation schedule should account for the expenses of these construction works. It will include the amount you paid to a designer who conducted work on the project.

Conclusion:

The above expenses will help to maximising your claims. The expert QS will help in preparing your rental property depreciation report. Meanwhile, don’t forget to include the money you paid to the council. As you need to pay fees to the council for several services. These are the expenses that you may incur with lodging application fees or securing council permits. If your building is your own property, you may have to spend money on infrastructure. So, your depreciation report must include the above expenses.

Benefits and Shortcomings of Renting a Furnished Property

When a property owner plans to rent their house, there are many things that come along with it. Renting in a furnished or unfurnished format is just another thing to consider. However, there are various advantages that an investor can enjoy by renting their property as a fully furnished residence, especially depreciation for tax purposes. However, one needs to take into account all the factors to determine whether letting the property in a furnished state outweighs letting it out in an unfurnished condition.

Disadvantages of renting a furnished property

Though there are many advantages of renting a furnished property owing to the tax benefits, there are a few disadvantages too. The first shortcoming is that you are required to spend oodles of money when you plan to furnish your home. In no way, is it a cheap investment; expect it to cause a money drain. On the other hand, you may not be sure about how your tenants will look after your possessions. Finding people who can do justice to your property is a challenging task. Thus you may always find yourself in skeptical mode worrying if your belongings are in safe hands.

Advantages of renting a furnished property

On the contrary, there are a few reasonable advantages to renting a furnished property. A furnished property makes your house look appealing. Thus you can increase the weekly rent amount. A furnished house attracts the customers; there are less chances that your home will face rejection and lie vacant for a long time. Apart from all these benefits, one of the major benefits that one can redeem is tax benefits. Yes, furnishing is proportional to high weekly rentals and property tax depreciation at the same time.

Depreciation benefits for a well-furnished property

Renting a fully-fledged property allows some benefits re: depreciation deductions. The house depreciation report depends a lot on the circumstances and the property type that the investors are planning to rent. The owners can claim a deduction even on the plants and equipment that exist in the property based on the life of the items. Yes, all your smoke alarms, oven, fixtures, etc. can also be listed down for a tax rebate. The depreciation rates of these commodities are generally higher than that of capital works or construction.

Though you may feel that furnishing your property may cost you a few more bucks, it can serve fruitful to you in the long run. The initial investment can bring in long term benefits of claiming tax rebates every year.

Bottom Line:

Seeking advice from experts and getting them to prepare property depreciation reports can further help you to reap more benefits by using their years of expertise and knowledge.

Why you Need a Depreciation Schedule when the Construction Cost is Known

As the financial year comes to an end, it becomes imperative to get your depreciation ATO tax depreciation schedule sorted. You gain several benefits of securing a depreciation schedule prior to June 30. It will help in enhancing your return and make the most of your investment. It is worth noting that a quantity surveyor report also consists of a schedule of depreciable assets also known as capital allowances. Meanwhile, a different deduction for the fall in the value of depreciating assets in a rental property can be claimed.

Given below are some of the points that you must be aware of the depreciation schedule:

1. Depreciation deduction:

The Australian Taxation Office permits the property owners to seek a claim for depreciation or fall in value as a deduction. Depreciation has been categorised as a non-cash deduction thus meaning an investor won’t need to spend money to be able to make a claim. It is for this reason that depreciation deductions are ignored. And, it becomes an expensive mistake for investors as depreciation deductions present huge taxation advantages. When tax time arrives, property owners should ensure they have claimed all the deductions for which they are eligible. Income-generating property owners must seek claims for property depreciation tax deduction linked to the structure of building along with plant and equipment assets.

2. Claim cost of schedule:

A depreciation schedule has got a one-off expense that continues until the life of the property or for forty years. It will ensure that the owners have claimed their respective depreciation entitlements precisely.  It is worth noting that the cost of the depreciation schedule is 100% tax-deductible. One of the major benefits of securing a depreciation schedule prior to June 30 is that investors can claim the fee straight back that financial year. Investors must estimate tax returns in a precise manner.

3. Partial year claims:

In the case that you purchased an investment property and are waiting for the next financial year for claiming a deduction, you may miss considerable savings. Investors will be able to claim partial year deductions for the tenure in which they acquired their properties before June 30. The depreciation values of assets are precisely adjusted in accordance with the period during which it was owned. For instance, if the property was owned or rented for six months, the owner can get 50% yearly deductions.

Conclusion:

Investors must arrange a depreciation schedule at their earliest convenience. Deppro quantity surveyors have expertise in preparing depreciation schedules that save our clients lots of money.

A Quick Guide to Clear All Your Queries about Capital Gains and Property Depreciation

There are many questions that come to mind associated with tax depreciation report. You may often hear people asking how to claim their reductions? How to make the most of it? There are many such interrelated queries that investors have in their minds. So here in this article, we will take you down through a few questions that will clear all your doubts.

What is exactly property depreciation? Is it beneficial?

Property depreciation can be thought of as the depreciation of value on a building or property owing to the wear and tear that naturally occurs over the years. But property depreciation is not bad at all times; in some cases, it can reap benefits for you. When you have to pay taxes, property depreciation can be a boon that allows you to claim for property investment returns which means fewer taxes to be paid at the end of the year.

Capital works and its association with CGT

Capital works can be claimed on the building structure, which includes walls, roofs, bricks, electrical cables, tiles, etc. Claiming for capital work deductions can help in lowering the value of the base of your possession, which is further added to the capital gain. Thus you can expect a rise in the CGT amount, which becomes applicable during the sale process.

CGT and equipment depreciation

Many might not be aware of this, but you can even claim depreciation deductions on removable plants and mechanical equipment. Yes, you have heard it right, when you plan to sell your property, the profit or loss percent is computed separately on such items. You can seek assistance from tax depreciation quantity surveyors at Deppro to become more acquainted with the details. If the depreciation asset’s termination worth is higher than the cost then, you get to have a capital gain. On the other hand, the reverse case applies to incur a capital loss wherein the cost is higher than the termination price.

Can investors file for a discount?

A business owner who has invested in a property for more than a year stands eligible for a 50% CGT exemption. But, it is mandatory that they hold the property for more than a calendar year from the date of signing the contract.

Does property depreciation claim add to capital gains?

Yes, one can claim for equipment deduction and capital works at marginal taxable rates. Being in possession of a property for a period greater than 12 months makes you eligible for claiming a 50% deduction while selling your property. This implies that only half your property value is carried further for CGT, enabling you to file for capital work deduction claim. This will bring in some additional cash flow to your account, allowing you to be confronted with better opportunities for investments and to reduce the burden of your loans.

Types of CGT exemptions for people who reside in the property

If you are someone who dwells in the property, then you are excused from CGT as long as you use that property for your residence. Also, the land should not be more than two hectares. On the other hand, if the owners rent out the property to someone else and consider moving out, then the CGT exemption can be filed for about six years. But there stands a condition that such people should not purchase or own any other residential place.

Conclusion:

So these were a few things that you need to know as an investor to claim for property tax deductions. If you have more such questions haunting your mind, do let us know! We are here to help!

A Depreciation Checklist for Commercial Property Owners and Tenants

You may find it difficult to comprehend the various tax depreciation allowances available for owners and tenants of commercial property. With increased awareness about Australian tax depreciation, property owners and tenants may make more informed financial decisions and enhance their cash flow. A property owner is eligible to claim depreciation for Division 43 capital works that they have paid for. This may include building, structural additions, and recently constructed or renovated kitchens, outdoor areas, and improved bathrooms. Additionally, Division 40 assets are also claimable that they have paid for and included as part of the tenancy agreement. Tenants may also claim depreciation for building fit-out in case they paid for it as along with machinery, furniture, etc.

Here is the checklist:

1. Capital works deductions:

These deductions are applicable to structural elements of a building. Capital works deductions will apply on bricks, mortar, walls, tiling, flooring, wiring, concrete, mezzanines, etc. These deductions are based on the past expenditures of the building. And, apart from the tourists’ accommodation, they can be claimed on commercial buildings in which construction started after July 2, 1982. Capital works deductions for tourists’ accommodation are eligible to be claimed on building in which construction began after August 21, 1979. Consider these factors when you calculate depreciation for property.

2. Plant and equipment depreciation:

Plant and equipment assets can be defined as those assets that are removable within an income-generating property. It may include hot water systems, ceiling fans, carpets, air conditioners, exhaust fans, light shades, and blinds, among others. Depreciation for plant and equipment assets will be calculated on the basis of the individual effective life of every object as specified by ATO. The actual life of assets tends to differ from one industry to another industry. Therefore, it becomes significant to refer to an expert Quantity Surveyor, as they will ensure that deductions are calculated appropriately.

3. Tax depreciation schedule:

A tax depreciation schedule can be described as a report that includes all deductions in the income-generating property. The report is prepared with the assistance of an expert Quantity Surveyor. It can assist to enhance property owners’ and commercial tenants’ flow of cash. The quantity surveyor will require a few details while preparing a schedule. Amid the vast commercial property types, an expert site inspector will have to carry out detailed scrutiny. In this they will assess the building and floor coverings, specify construction methods, the material used, condition of te property, and workmanship, among other things. The Quantity Surveyor will then use these details to enhance depreciation deductions.

Conclusion:

Tax Depreciation Schedule will remain in existence for forty years. The quantity surveyor will also extend his help to property investors in claiming depreciation on investment property. If you are keen to boost the capital works and depreciation deductions, you must always hire a professional quantity surveyor as they will help in processing known and unknown costs alike. Not to mention, they can also asses the contract of sale and tenancy contracts to make sure that building works and assets are correctly allocated between entities.

Everything You Need to Know About Property Depreciation

Property investors receive many taxation advantages in Australia. And, this is the reason why they prefer to make their investment in properties all across the country. But, sometimes investors fail to file the Australian tax return and subsequently miss out on the benefits of depreciation deductions. A large number of investors are aware of the various claims available to them for expenses. The expenses may include loans’ interest, council rates, property management fees, repairs and maintenance costs, among others.

Given below are some vital details about property depreciation that you should be aware of:

1. Property depreciation:

When the building begins to age, its shape and the assets inside it tend to wear out. These things depreciate over a period of time. It is worth noting that the Australian Taxation Office or ATO has permitted income-generating properties’ owners to claim depreciation as a tax deduction. Depreciation deduction can be divided into two separate categories. It includes division 43 capital works allowance and division 40 plant and equipment depreciation. It will help in preparing a property depreciation schedule.

2. Significance of capital works allowance:

It pertains to the claims for the wear and tear that takes place to the building structure and fixed objects. Capital work will contain objects such as roofs, walls, doors, kitchen cupboards, and toilet bowls, among others. Any residential building where construction started after September 15, 1987, will make its owner eligible for capital works deductions. The deduction can be sought for up to forty years at the rate of 2.5% every year. Owners of buildings built before 1987 should discover what deductions will remain available as these buildings underwent renovations. The renovations will lead to capital works deductions. Rental home returns have emerged to be highly profitable.

3. Plant and equipment depreciation:

Plant and equipment depreciation are eligible to be claimed for conveniently removable fixtures and fittings available inside the property. There are over 6000 various depreciable assets identified by ATO. It includes carpets, blinds, air conditioners, and smoke alarms among others. Each plant and equipment asset is allocated an individual effective lifespan and depreciation rate. As per the existing legislation, second-hand property owners who exchanged contracts after May 9, 2017, cannot claim deductions for earlier used plant and equipment assets. And, investors who bought new residential and highly renovated properties, commercial real estate will be able to claim depreciation deductions.

4. Importance of claiming depreciation:

It is significant for the owner of the residential property to claim a depreciation deduction. It will help in making a huge difference in an investors’ cash flow. We have discovered that a residential client’s average first-year claim was approximately $9000.

Conclusion:

You may claim the depreciation of your investment property against taxable income. And, seasoned property investors are aware of the benefits of depreciation residential rental property. Some property investors will even take depreciation into consideration prior to buying their next investment property. Anyone buying a property for the purpose of generating income will remain eligible to depreciate buildings and assets inside it against assessable income. It will help to lessen their tax burden and maximize the gains.

Renting or Buying: Which is the best choice for a commercial property?

Deciding whether to purchase or rent a commercial property may be tough at an instance. When you plan to buy a property, you have to pay for it upfront. In case you have taken a loan, you only own the property once you have cleared the loan. But, when you rent a property, you would be considered as a tenant rather than the owner. So, before contacting an agency to know about tax depreciation investment property, here are some important things you must know:

What happens when you rent a commercial property?

When you consider availing a property on rent, you have to bear the costs as per the terms of the lease. While the landlord pays the capital cost, you can think about investing money in your business and focus on growth. If you wish to invest in the property, then you need to go through the rental property depreciation report. This would give a fair idea of how the tax would be deducted for the year.

How can renting a property be beneficial for you?

Once you avail a commercial property on rent, you can think about shifting to another location only when the lease ends. If you observe fluctuations in the market conditions or a change in personal life, then you wouldn’t have to bother much for a longer-term. Establishing a business at a property on rent can really help when the business is going to evolve in the forthcoming years. Renting also implies that you have to give less upfront cost. The concerned person has to pay a deposit equivalent to anything between 25% and 50% of the actual purchase price. If tax depreciation reports are what you’re concerned about then, you could contact Deppro.

What happens when you buy a commercial property?

When you make up your mind for buying a commercial property, you initially have to bear the upfront cost and the ongoing costs ahead. As you manage your business, you do have the right to make structural changes to suit your requirements. You may also think about selling or giving the property on rent a few years later. You can do anything without approaching an agent or a landlord.

How can purchasing a property be beneficial for you?

Purchasing a property means you can develop your business at a specific location for the long term. You also don’t have to worry about shifting assets from one location to the other. But, before finalizing the decision, it’s better to go through the tax depreciation investment property rules. While you start paying the upfront fees, you won’t have to pay for the rent that may increase year after year. You can actually focus on bearing other expenses while the payment is made at a fixed rate. Later, you could also make up for capital gain when you decide to sell the property after some years.

Conclusion:

Finally, no matter what your decision might be, you can always gain some significant tax benefits when the officers consider tax depreciation. If you are the owner of the property, you can claim depreciation under division 43 and division 40. While division 43 refers to capital work deductions, division 40 refers to deductions for assets and plant equipment. When you submit the tax returns, you can claim the depreciation on investment property ATO as the deducted tax.

3 Important Steps to Expand the Portfolio of Australian Property Investors

The decision to invest in a property in Australia is a significant one. And, you must do thorough research prior to starting your investment. The depreciation tax benefit is immense in this country and this is the reason why many investors invest in property. It is significant to decide when, where, and how to expand your property portfolio. It will help in enhancing your chances of success and minimise the risks associated with the investment. Investment in the property will help you in claiming the valid tax deduction like depreciation.

Given below are some of the vital steps that you must consider:

1. Carry out a thorough research of the property market:

It is vital to carry out a research when you either plan to purchase your first investment property or expand your portfolio. You may evaluate economic aspects and the potential of capital growth in areas with lesser entry charges and predicting high growth. You must also check Development Applications to find out any roads or infrastructure projects. The projects will contain new schools, parks, commercial spaces, etc. These things will attract a large number of renters in the area. It is also significant to examine areas with a vast range of public transport options, job opportunities for tenants, etc. Knowledge of these factors will assist in deciding future property income possibilities. You should also be aware of the existing ATO depreciation rates.

2. Evaluate acceptable risk:

You should also be aware of the kinds of risks that you are ready to accept. All the property investments are plagued with some sort of financial risk. And, identifying your limits will be vital in reducing your possible stress. It will also help in ensuring that you may not end up overextending your financial obligations. You must identify possible changes in economic aspects that may include interest rates or repairs and maintenance that might be needed on the property. It will also help in preparing your tax depreciation schedule for rental property.

3. Select vast locations and properties alternatives:

If you are keen to lessen your risk, it is significant to diversify your property portfolio to enhance your access. You must also spread the financial risks in a vast range of assets. In the financial year 2018/2019, it was discovered that 74% of investors bought investment properties in metropolitan cities. Deppro also noted that investors liked to stay with their comfort area with a vast 92 residing in metropolitan cities. The investors also bought investment properties locally compared to 8% who invested in local areas.

Conclusion:

You must have identified by now the significance of expanding your property investment portfolio. You can get your federal tax depreciation schedule prepared by experts to enhance your depreciation claims. A large number of property investors prefer to lay emphasis on residential rental properties. But, commercial properties also provide several advantages and you may also consider them to make your investment. But some investors feel that commercial properties may attach greater risk as a result of changing economic aspects. There is also a potential lengthy vacancy rate between tenancies.

Commercial Property: Frequently Asked Depreciation Questions

You may take the word ‘depreciation’ as a loss. Yes, you are right in your approach, as the real meaning is all about losses and reduction. But depreciation, in reality, stands as profitable for business owners considering their depreciation claims. Deppro depreciation is one of the significant reasons which compel people to invest in real estate. Being an investor, there are many things that one may be curious about.

So here are a few frequently asked questions that may help your inquisitive mind to get answers about the same:

What do you mean by depreciation?

We all know that when a property or building is held or a long time, its value starts facing a depreciation. Thus accordingly, the owner becomes eligible to claim for tax depreciation owing to the wear and tear caused on the property. There are basically two kinds of categories on which a discount can be claimed. The first category is plant and equipment depreciation which is inclusive of removable items of the property such as AC’s, fans, lights, etc. On the other hand, the second is capital work depreciation which is applicable to permanent or fixed assets that cannot be moved, such as bricks, windows, etc.

How to claim for depreciation easily?

The very first thing to do in such a case is to seek assistance from property depreciation consultants to design your property depreciation schedule. One is required to pay a one-time fee for availing BMT tax schedules which lays out all the eligible tax deduction criteria. Ranging from depreciation in manufacturing, retail, office towers, and a lot more, this lists down all the eligible tax deduction standards for your commercial property.

Can you calculate depreciation on your own?

Everything cannot be your cup of tea; thus, it is always better to leave such things in the hands of a professional. You can knock the doors of quantity surveyors to get such a task done with ease.

Why does depreciation stand as important?

Owners can claim a huge amount of money as a deduction in tax every financial year. So you can very well understand how this depreciation minimizes the amount of tax that you have to pay during the financial year-end. It enhances the cash return and also balances the value for operating a business or being a property owner.

Are there any age criteria for a building to claim for a deduction?

Both old and new commercial buildings can reap in some depreciation benefits for the renters and the tenants. You can also get connected with an expert quantity surveyor to gain further information about the same. Ranging from final inspections to investment property calculator, occupancy certificates, they can also help you in efficiently calculate the age of your property.

Can new property owners insist for a depreciation claim based on the renovations taken up by the previous property owner?

Yes, the professionals can take into account all the renovations done on your property and use the data for preparing your depreciation schedule. Just for instance renovations such as plumbing, electricity, and similar such things can be taken into account for qualifying the depreciation claims.

Bottom Line:

So these were a few questions and answers that you must be aware of while preparing a rental property depreciation scheduleIf you have more such questions hitting your mind, do let us know!