How your tax depreciation reports are prepared can substantially impact the value of your tax deductions.
A lot of organisations miss out on opportunity to maximise their tax benefits between the purchase of a property and its refurbishment. We advise on the steps you can put in place now to maximise your depreciation claims so every time any plant and equipment or part of a building is removed or demolished, the remaining un-deducted depreciation is written off maximising your tax deductions.
The MBM Difference
To maximise your depreciation for future write-offs we use a location-based asset register linked to MBM’s bespoke tax depreciation reporting systems. This creates a ‘live’ asset register which is always current and will always reflect exactly what is in the building. It allows for the maximisation of write-off as works are undertaken.
Case Study – Office
An MBM client purchased a high-rise office building with a plan to undertake a refurbishment within three to five years.
MBM created a location-based asset register linked to our tax depreciation report. On completion of the refurbishment we were able to identify the exact items that were demolished and removed enabling the client to write off the remaining un-deducted amounts of these items. We also advised against using the low value pool (LVP) accelerated depreciation option for items with an individual cost of less than $1,000 which would have prevented the remaining un-deducted amounts from being written off.
The refurbishment was completed five years after settlement and cost just over $15m.
If the client had applied a typical approach to tax deprecation the value of the tax depreciation benefits for the first full financial year after construction completion would have been $1.3m for the refurbishment and $1.8m for the original purchase of the building, totalling $3.1m. By applying MBM’s approach the value of the tax depreciation benefits in the same financial year increased to $5.4m an improvement of $2.3m or an increase of 74%
By choosing these depreciation methods and deciding to write-off the remaining value of the demolished building items instead of waiting years to claim the depreciation on these items, our client was in a much stronger financial posit