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.

Is it a Repair or Capital Improvement

To Repair or Not to Repair – That is the Question!

Repair or Capital Improvement

Is it a Repair or Capital Improvement

When you renovate a property, the builder will generally supply a Tax Invoice that outlines the amount owed and an overview of the work carried out.

If part of the work carried out is deemed to be a repair in nature, you can claim the total cost of the repair as an outright deduction.Depreciation Quote Schedule

BUT, if the work carried out is deemed to be a capital improvement – you must claim the cost of the work over 40 years at a fixed rate of 2.5% per annum.

Unfortunately, the determination of these works is not always straight forward.

So how can you determine whether it a repair or capital improvement?

The correct classification of the renovation can make a big difference to the bottom line for a property investor.

Generally, a builder is not thinking “How can I itemise this Tax Invoice in order to maximise my clients’ tax return?”.

That’s where Quantity Surveyors can help!

Quantity Surveyors, in my opinion, are well placed to assist in the determination of capital works items versus repairs, potentially saving property investors thousands.

Chasing High Yield Property – What to Look Out For

High Yield Property

High Yield Property

Chasing High Yield Property

One of our clients recently purchased of a block of 6 units in Port Macquarie and initially I thought “Wow, what a good deal.” Depreciation Calculator

The client had purchased 6 units for a total of $550k and according to RP Data each unit was renting for $130 per week. So that’s $780 a week in rent which equates to roughly a 7.5% yield. Not too bad and he was obviously chasing a high yield property.

We were engaged to prepare depreciation schedules on the 6 units, so we inspected the property and gathered the relevant data and inspection photo’s.

When I reviewed the job and the photos it was clear the client had purchased an incredibly run down block. In my opinion, this block was in need of major capital improvements in the coming years.

I think the client could be facing repair work in the region of $30,000 per unit – that’s $180,000 – in order to make them fit for occupation in the near future. That will certainly eat into what looks like a very good yield on paper.

So the moral to the story is that property investors should always consider future upkeep into the real investment yield equation when doing their figures. Sometimes there is a reason a property is showing a high yield – and the future capital expenditure may play a part in that.

If you have bought an investment property and need a quote for a depreciation schedule – click here or try and work out how much you can save using our free depreciation calculator

Speaking of maximising investments – here’s a video I made on a similar topic that you might enjoy…