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Are you planning to pay less tax this year?

An accountant chats to their client about claiming depreciation on their investment property, discussing what can be claimed. The client is pointing towards the laptop to show their accountant what they are claiming.

April 2024

It takes planning to reduce your tax, and June 30 is only 10 weeks away.

Yep.

There is no point calling your accountant in the last week of June and asking for ideas. And you don’t want to be sitting in front of them in July and having them sigh and shake their head slowly and say, ‘We should have talked about this months ago.’

Property is our thing, and we have been doing Depreciation Schedules for over 20 years, but some obvious other planning things to consider are opportunities like the concessional contribution to super. Have you maxed out yours? Many people think only those with self managed super funds have any latitude with super.

Are there expenses for next year you can prepay this year? Payment for council rates, interest, strata fees, insurance and other things can be brought forward. This is especially useful for people who expect to earn less next year. 

As for property related opportunities, are there niggling maintenance and repair issues you can deal with now? New Assets you can purchase to take advantage of the generous Low Value Pool rates? They’re the things we’ll look at now in depth.

And of course, whether you have an up to date Depreciation Schedule. If you want to make an enquiry about a new Depreciation Schedule for a residential or commercial property, call us on 1300660033, or enquire online.

Then way down the bottom, we’ll note the things the ATO is looking out for this year.

Two people install a new kitchen, Replacing an entire kitchen is an example of an improvement; replacing just a broken cupboard door would be considered a repair, for example.When is a repair not a repair?

When it’s an improvement.

Repairs can of course be claimed as a 100% immediate deduction, but the ATO’s definition of a repair is different from yours.

To the ATO, a repair means work you have done to rectify damage that has occurred while YOU were renting out the property. The longer you have been renting out a property, the greater the scope to claim work as repairs.

Putting through a large repair claim after only renting out a property for a year or so will likely prompt a ‘please explain’ letter.

So if you can’t claim work as a repair, what do you do? 

Claim it as an improvement and we’ll add it to your Depreciation Schedule free of charge. We do that all the time for our clients. All you do is send us an email telling us what you did, when, and what it cost – we don’t need receipts.

You can also bring forward any maintenance work and do it this year if the deductions would be more helpful this year – no point spending money in July if you could have spent it, and then claimed it, in May or June.

We have written about repairs more extensively here.

A new stove is an example of an Asset that can be replaced quickly before June 30.Now is the time to buy new Assets.

When we say Assets, we are referring to things that can be depreciated quickly.

Assets are things like blinds, floor coverings, fans, appliances etc.

If you buy an Asset for your rental property costing less than $300, you claim the whole cost immediately. So if you have something you think might need to be replaced soon, bring that forward and do it before June 30 so you claim that cost back sooner.

For Assets costing between $300 and $1,000, there is the Low Value Pool. Assets depreciated in the Pool get written off quickly.

In the first part year, you can claim 18.75% of the installed cost of that Asset. And a part year can be as little as a few days. So an Asset bought and installed on, say, June 28 will depreciate at 18.75% in just those two days. Then in the following full year, the reduced value of the Asset can be depreciated at 37%. 

You can find some more expansive information on the Low Value Pool here.

A modern double storey house overlooking a pool. Property owners renting properties on short term rental platforms such as Airbnb need to ensure that they are reporting their rental income correctly.Things the ATO are looking out for this year.

The ATO doesn’t need to look as hard these days for people doing the wrong thing because more and more information comes to them automatically. 

Airbnb and other short term rental platforms now pass on income details for hosts to the ATO so the ATO can make sure it is declared.

And banks are now required to collect information on 1.7 million residential property loans and pass that information on so it can be compared to taxpayer claims.

The ATO these days knows a lot about you and every year they know more. Sneak the wrong stuff into your recycling bin? They’ll be onto that. Jaywalking? Yep, they’ll know.

Having an accountant can insulate you in part from scrutiny, as can getting a Depreciation Schedule that is ATO compliant from a provider, like us.

Questions about depreciation? Email Depreciator, the depreciation specialists, for the answer.Make a no-obligation enquiry online or call us on 1300 660 033 and rely on our 20-plus years of experience in estimating depreciation returns.

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Are you depreciating commercial fitouts correctly?

An overhead shot of a man and a woman at a desk looking at a laptop with Depreciator's website open. Office fitouts can be tricky but can yield great depreciation for your clients.

Chances are you’re not.

Some of them even we find tricky, and we have been doing Depreciation Schedules for over 20 years.

If you aren’t doing it properly, your clients might be missing out on deductions.

Sure, if it’s just a small factory and the client has just installed a mezzanine and some racking, that’s easy.

But what if it’s, say, a $900K office fitout that involved some demolition and there is a landlord contribution in the mix and the landlord also wants a Depreciation Schedule. That’s a job that just came in today for us.

Key Points:

  • How we approach a Depreciation Schedule for a fitout for one of your clients.
  • If your client has bought a building with an existing fitout and decides to demolish that fitout, they should be able to claim the disposal value of any Capital Works they discard.
  • When the landlord makes a contribution to the fitout, it makes sense to ascribe as much of the Capital Works as possible to the landlord.

A woman smiling at her client as they work on a project. Depreciator will work with your client to understand the total spent on the fitout and what the landlord owns of that fitout to create a Depreciation Schedule.How do we approach a depreciation schedule for a fitout?

Here’s what we do:

  1. First up we find out the total spend on the fitout and get whatever breakdown is available for the Capital Works and Plant and Equipment.
  2.  Then we get a contact at the fitout company to help us break down the P&E further.
  3. Next we ask whether there was a landlord contribution and whether there were any conditions around it (and whether the landlord also expects a Depreciation Schedule).
  4. And of course we find out whether we are including GST in the costs and whether one or both entities want the Instant Asset Write-Off employed.
  5. Then we send a Quantity Surveyor there.

That’s what it takes to do them properly, so isn’t it good that you don’t need to do all that? All you have to do is refer your client to us using your link and we take over.

Let’s look at some other fitout conundrums:

What if your client has bought a building with an existing fitout?

This one happens all the time with offices and shops.

Your client might not be intending to occupy the property, but they will want to make the most of any deductions available.

If there is a tenant there and they did the fitout, they would be claiming it. But what if the landlord made a contribution to that fitout? Nobody ever thinks to dive that deep.

What if it’s vacant possession and the fitout was left behind by the tenant? Your client bought that fitout when they bought the building and should be able to depreciate it.

But what if your client decides to demolish that fitout so they can present prospective new tenants with an empty shell? They should be able to claim the disposal value of any Capital Works they discard. There is often good money thrown into skip bins without anybody realising.

We always tell clients to talk to their accountants before they do anything to a property. And you in turn might want to talk to us.

An office space with an industrial feel. Lage pendant lights hang from the ceiling in front of a green wall. If a fitout has a landlord contribution, chances are the landlord will also need a Depreciation Schedule.How best to deal with a landlord contribution?

Just about every fitout Depreciation Schedule we have done in the last year for office in the capital cities has had a large landlord contribution in the mix. Presumably it’s what landlords need to do to entice businesses into leases after Covid. Prospective tenants right now are spoilt for choice.

And in every case, those landlords have expected the client to provide them with a Depreciation Schedule as a condition of handing over the money.

It’s always best we know this up front. With the fitout job that came in today, of that $900K total, the landlord generously (but probably with little choice) chipped in $300K.

It makes sense to ascribe as much of the Capital Works as possible to the landlord. That’s the walls, glass partitions, fixed floor treatments, ducting etc. Then the client gets to claim the majority of the Plant and Equipment i.e. the stuff that depreciates quickly. It often surprises us that when landlords hand of significant incentives, they don’t stipulate what work it is to be put against.

News on the Instant Asset Write-Off

There is no news on the Instant Asset Write-Off.

It’s still stuck in the Senate.

And that does not indicate the Senate are pondering deeply where the latest threshold for the Instant Asset Write-Off should be. It’s because the Senate is yet to pass the Support for Small Business and Charities Bill and the Instant Asset Write-Off is in there.

It is anticipated that the ever shifting threshold will be back at $20,000 for Assets first used or installed ready for use between 1 July 2023 and 30 June 2024.

Questions about depreciation? Email Depreciator, the depreciation specialists, for the answer.If you have a client we can help with claiming depreciation for a commercial or a residential property, please use your booking link, or make an online enquiry.