SME owners should not overlook the value of depreciation deductions when preparing their business claims for the financial year as there are a wealth of tax savings available that vary from industry to industry. We find that some SME owners fail to recognise the full depreciation potential of the building they operate in simply because they aren’t aware that certain assets within their commercial property and premises hold deductible value.
The question isn’t whether the owner of a commercial property will for qualify deductions, but rather how large their claim for deductions could be.
While commercial properties are many and varied, a specialist Quantity Surveyor will be able to find deductions in properties ranging from offices, to industrial or retail spaces which may even amount to over $100k in tax savings.
According to an analysis of the commercial depreciation schedules BMT have completed, an office that is purchased for around $600,000 could hold cumulative deductions of $91,500 to $119,700 over the first five years of ownership, and one purchased for around $900,000 could hold cumulative deductions of $123,500 to $164,500 in the same period.
An industrial space that is purchased for $1 million may hold deductions that add up to $139,500 to $185,500 over the first five years and a hotel purchased for $2 million $315,200 to $345,200 in deductions in those five years.
According to the Australian Tax Office, deductions can be claimed in two categories:
- Capital works allowance for the structural elements of a property such as walls, floors and ceilings.
- Plant and equipment depreciation deductions for a property’s fixtures and fittings such as hot water systems, blinds and stoves.
There are many plant and equipment assets that are unique to different industries and some SME owners may not be aware of the deductible value of these assets that are essential to their business operations.
For example, gym owners may be able to attract tax savings for equipment such as treadmills, leg presses and elliptical bikes or cross trainers. In terms of the first full year deductions; treadmills could attract $1645, a leg press $798 and an elliptical bike or cross trainer $1217.
For medical practitioners who require assets such as a dentist chair or an adjustable medical bed, deductions of around $3314 and $1140 respectively may be claimed in the first full financial year alone.
Business owners in the hospitality industry could be entitled to first full year deductions of around $4654 for a beer dispensing system, $1031 for food processors and $2194 for a coffee-making machine.
SME owners should take advantage of this twelve-month extension of the instant write-off scheme – that allows SME owners with an aggregated turnover of less than $10 million to claim the full value of plant and equipment assets valued at under $20,000 in the first full financial year – as they can go a long way in helping businesses purchase the assets needed to grow and expand, whilst contributing to a positive cashflow position.
Engaging with a professional Quantity Surveyor is the right first step in helping you uncover a hidden gold mine in tax savings. The relatively small investment in a depreciation schedule is often outweighed by the extent of deductions a Quantity Surveyor will pick up. And many investors may not realise the cost of the schedule itself is also 100 per cent tax deductible. Those who order a tax depreciation schedule prior to 30 June can claim the deductions in the same financial year.
Bradley Beer, Chief Executive Officer, BMT Tax Depreciation