Property Depreciation Schedules - The New reality

The ATO went Too Far and are in the Firing Line!

ATO Went Too Far

“I’m having a Rant” N.B. this is not me – he does it far better

Depreciation CalculatorMany, many moons ago all Quantity Surveyors interpreted the Tax Act differently when preparing depreciation reports.

For example, some of us would say that kitchens were part of the building and others considered them to be Plant & Equipment (P&E).

Generally speaking it’s better to have an item considered P&E because you can claim it at an accelerated rate of depreciation.

(UPDATE: 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).

The ATO saw the discrepancies and finally published a definitive list that we could all use.

The rant starts now- How the ATO went too far:

The ATO went too far! You see, they classified items such as kitchen cupboards, shower screens, vanity cupboards and many other items into the building allowance which means they have to be claimed over 40 years. Depreciation Quote Schedule

I don’t know about you – but I don’t want a shower surrounded by a 39 year-old shower screen, do you? Eeeww.

I see more & more properties that are 20 years old and have needed a serious makeover in order to get a tenant.

TIP: Don’t let the ATO get away with it – if you do remove things from your property consider a Scrapping Schedule.

If you do need a quote for a depreciation schedule, please click here.

New Tax Deductions for Small Businesses

tax deductions for small businesses

Joe Hockey delivers early Xmas present to Fit-out Contractors

Joe Hockey delivers early Christmas present via tax deductions for small businesses.

Small businesses with a turnover of less than $2m can now claim an immediate tax deduction when purchasing plant and equipment valued under $20,000.

This new tax break will deliver an early Xmas present to fit-out contractors who specialise in restaurant and small office refurbishments.

I was expecting a tax break but was surprised by the quantum of the tax break. Depreciation Quote Schedule

I think $20,000 as an immediate tax deduction for individual items is a huge amount and an incredible incentive to bring that fit-out forward.

Fit-out contractors now believe in Santa Claus and he’s taken the form of Joe Hockey.

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 over $123,000. That’s a HUGE difference.

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 four main points to consider:

  1. Small businesses should ensure a detailed report of any fit-out costs be carried out.
  2. When acquiring any new asset, small businesses should try to keep the costs below $20,000.
  3. This generous bonus has an expiry date of June 30, 2017.
  4. Assets costing over $20,000 can still be depreciated but not claimed as an outright deduction.

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

Now has never been a better time to upgrade that office or refurbish your restaurant.