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.
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!!!
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.