Property Depreciation Schedules - The New reality

Stimulus Package nothing to sneeze at

The Morrison Government has today announced a $17.6 billion economic plan to keep Australians in jobs, and to keep businesses in business in light of the Coronavirus pandemic.

The Government has outlined an increase of $700M to the instant asset write off threshold from $30,000 to $150,000, and has also expanded eligibility to businesses with a turnover of less than $500M (up from $50M).

Put simply, if you were to buy carpet for your office that costs $40k, previously you would have had to depreciate it – now you can simply write it off.

Washington Brown recently refurbished our office for a cost of $202,000 and were able to claim $35,000 in depreciation in the first year. If we’d carried out the same fit-out today, our first-year depreciation would’ve been a much higher $152,000.  That’s a HUGE difference.

The remaining $50,000 relates to capital works items, like painting and plumbing, and will still need to be claimed at 2.5% per annum over a 40 year period.

Quantity Surveyors are experts in breaking down the overall construction cost into individual items and now has never been a more appropriate time to do this.

There are five main points to consider:

  1. Businesses should ensure they have a detailed report of any fit-out costs to be carried out.
  2. When acquiring any new asset, businesses should try to keep the costs below $150,000.
  3. This generous bonus has an expiry date of June 30, 2020.
  4. Assets costing over $150,000 can still be depreciated but not claimed as an outright deduction. Businesses with a turnover of less than $500 million will be able to deduct an additional 50 per cent of the asset cost in the year of purchase.
  5. This accelerated depreciation (point 4) will expire on the 30th of June 2021.

Some examples of what may qualify for an immediate tax deduction include carpet, desks, blinds, work stations and a lighting upgrade.

Whilst we are currently in uncertain times, this incentive aims to assist both your business and the broader economy as well. 

The Small Business Bonanza!

We often get asked to value not only buildings for depreciation purposes but also the plant and equipment inside it as well.

(NOTE: Deductions for plant and equipment items may only apply to commercial properties, brand new properties, if you bought the property prior to May 9, 2017, or some other exceptions – Read about the Budget changes here).

A client of ours recently purchased the Leasehold of a motel in Central Queensland, the couple now run the hotel. They don’t own the building as such, but they do own all the loose stuff that is used to run the motel.

This includes the beds, the clocks & the linen etc. Depreciation Calculator

Now, because the contract only listed purchase price and didn’t have a breakdown of what they paid for each item – they got us involved to prepare a depreciation schedule for them.

I was AMAZED at the results.

The Leasehold contract was approximately $400,000. We valued the plant and equipment at approximately $275,000.

Guess what – their 1st year deduction was around $250,000!!!

Small Business Asset Bonanza!
How? Well it all comes down to the new Small Business Assets depreciation regime.

Provided your small business turns over less them $2m dollars, per annum, you can claim any individual item that cost under $6,500 each immediately.

Now there aren’t many items in a hotel/motel that cost more than $6,500. So pretty much all of it was written off immediately.

One HAPPY client.

Work out how much you save using our free property depreciation calculator or make it happen and get an obligation free quote for a depreciation schedule now.