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IMPROVE THE CASH FLOW OF AN AUSTRALIAN INVESTMENT PROPERTY

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Smart investors

Claiming property depreciation will help you to save

In Australia, depreciation claims can make a significant difference to a property investor’s cash flow. Despite this fact, of all the tax deductions available for investors to make a claim for their property, depreciation is the one most often missed.

Smart investors

Smart investors

Recent statistics from the Australian Taxation Office (ATO) suggest that only 30 per cent of property investors claim depreciation for available capital works deductions, and just 18.75 per cent claim the depreciation of plant and equipment assets. This is quite a significant number of investors who are missing out on thousand of dollars they are eligible claim.

So why are Australian property investors failing to claim the depreciation deductions they are entitled to? According to Bradley Beer, The Managing Director of BMT Tax Depreciation, there are a number of reasons.

“One of the main reasons investors fail to claim depreciation is because they don’t need to spend any money to be able to claim it. As a non cash deduction, investors are often unaware that there are already deductions available to claim for the existing building structure and plant and equipment assets contained within the property,” says Bradley.

“Another mistake property investors make is to assume they’re ineligible because they own an older property, or they may have only recently purchased their property and think because of the short term of ownership it is not worthwhile making a claim. The reality is, it is worth making an enquiry for any property,” said Bradley.

For those investors who are unaware of what depreciation is and are wondering how to go about making a claim, we’ll explain.

ATO legislation allows the owner of any income producing property to claim a depreciation deduction for the wear and tear of a buildings structure and the plant and equipment assets the building contains.

BMT Tax Depreciation

BMT Tax Depreciation

To claim depreciation, investment property owners should contact a reputable Quantity Surveyor that specialises in depreciation. In Australia, the ATO recognise Quantity Surveyors under Tax Ruling 97/25 as one of the few professionals with the appropriate construction costing skills to estimate building costs for depreciation purposes.

The Quantity Surveyor will arrange for one of their specialist staff to perform a site inspection of the property to take measurements, adequate notes and photos of all of the plant and equipment assets contained in the property. This information will then be collated to put together a tax depreciation schedule which outlines all of the claims available for the owner for the life of the property (40 years). The property owner’s Accountant will then be able to use this information to process a claim when they complete the investor’s annual tax assessment.

An investor case study

The following scenario shows how a property investor’s cash flow will be improved by claiming property depreciation.

Margaret purchased a two bedroom apartment for $528,000 one year ago. Her property was then rented for $470 per week, with a total income of $24,440 per annum. Expenses for her property including interest, rates and management fees totalled to $37,935.

After calling BMT Tax Depreciation, Margaret found that she would be able to claim $9,938 in depreciation deductions. The following scenario shows Margaret’s cash flow with and without a depreciation claim.

2013_TM1-2-bedr-unit

Before claiming depreciation, Margaret would experience a loss of $164 per week for the first year of ownership for her property. Simply by claiming depreciation, Margaret was able to turn her cash flow position into a more positive one and reduce her loss to just $93 per week. In total BMT Tax Depreciation were able to save this investor $3,692 in just one year.

Handy resources for smart investors

Savvy investors often want to learn more about the benefits of tax depreciation. To help ensure investors are not missing out on valuable deductions and to provide extra information, BMT Tax Depreciation provides a variety of resources and applications listed below:

The BMT Tax Depreciation Calculator is a useful tool for investors to calculate the likely depreciation deductions available for any property. To download the Tax Depreciation Calculator for your iPhone or Android phone, simply click here. Alternatively, you can use the depreciation calculator online simply by clicking here.

BMT Rate Finder helps property investors and their Accountants to find out the effective life and depreciation rate for any plant and equipment asset that may be contained within any type of investment property, whether the investment property is used for commercial, industrial, manufacturing, retail or residential purposes.

Using Rate Finder you can search by industry or asset to find the effective life and depreciation rate of an asset for both the prime cost and diminishing value methods of depreciation. To download Rate Finder for your iPhone or Android phone, click here. Alternatively, to use Rate Finder from your desktop computer, simply click here.

BMT Resi Rates helps investors to find out the effective life and depreciable rate of any plant and equipment asset contained in a residential property. Resi Rates aims to assist Property Managers and property investors alike with disputes over damaged assets, and can assist with maintenance and replacement scheduling. To download BMTresirates for your iPhone or Android phone, simply click here.

Australian property investors who have any further queries about the depreciation deductions for their property or who would like a free over the phone estimate of their available deductions should contact BMT Tax Depreciation on 1300 728 726.

Article Provided by BMT Tax Depreciation.

Bradley Beer (B. Con. Mgt, AAIQS, MRICS) is the Managing Director of BMT Tax Depreciation. Please contact 1300 728 726 or visit www.bmtqs.com.au for an Australia wide service.

Investing

Stocks slip from highs; investors wait on Fed

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Stocks slip from highs; investors wait on Fed 1

By Matt Scuffham

NEW YORK (Reuters) – Global stocks slipped from record levels on Tuesday, with investors cautious as the Federal Reserve kicked off its two-day policy meeting and U.S. lawmakers continued to debate a new stimulus plan.

Those concerns overshadowed impressive results from a slew of companies, including from General Electric and Johnson & Johnson, which had earlier pushed the S&P 500 to a record high.

“Investors don’t expect the Fed to give any reason to think they are getting closer to talking about when they will consider scaling back QE, but nervousness is brewing on Wall Street,” said Edward Moya, senior market analyst at OANDA in New York.

Wall Street’s main indexes closed lower.

The Dow Jones Industrial Average fell 22.96 points, or 0.07%, to 30,937.04, the S&P 500 lost 5.74 points, or 0.15%, to 3,849.62 and the Nasdaq Composite dropped 9.93 points, or 0.07%, to 13,626.07.

The MSCI world equity index, which tracks shares in 49 nations, fell 1.99 points or 0.3%, to 666.09.

After a “buy everything” rally over several months supported by money-printing pandemic stimulus packages, near-zero interest rates and the start of COVID-19 vaccination programs, some investors are worried markets may be near “bubble” territory.

They point to rocketing prices of assets such as bitcoin or the soaring stock of short-squeezed videogame retailer GameStop.

“There is room for some consolidation,” said Francois Savary, chief investment officer at Swiss wealth manager Prime Partners.

Uncertainty over the timing and size of fiscal stimulus also tempered sentiment.

Disagreements have meant months of indecision in the United States, where new coronavirus cases have been above 175,000 a day and millions of people are out of work.

Democrats in the U.S. Senate will act alone to approve a fresh round of stimulus if Republicans do not support the measure, Majority Leader Chuck Schumer said.

U.S. Treasury yields were narrowly mixed in choppy trading, after hitting three-week lows on the long end of the curve, as investors remained cautious about the stimulus and the slow global roll-out of coronavirus vaccines.

Benchmark 10-year notes last rose 2/32 in price to yield 1.0347%.

The U.S. dollar edged lower across the board as traders showed a preference for riskier currencies.

The dollar index fell 0.2%, with the euro up 0.21% to $1.2162.

European stocks advanced, shrugging off political upheaval in Italy, as strong earnings from wealth manager UBS and auto parts maker Autoliv added to a string of upbeat corporate updates.

The pan-European STOXX 600 index closed up 0.6%, with a rally in automakers, industrial companies and SAP helping the German DAX outperform.

Europe’s broad FTSEurofirst 300 index added 0.64%, at 1,573.47.

The IMF raised its forecast for global economic growth in 2021 and said the coronavirus-triggered downturn in 2020 would be nearly a full percentage point less severe than expected.

Italy’s FTSE MIB rose 1.2% after Prime Minister Giuseppe Conte handed in his resignation to the head of state, hoping he would be given an opportunity to put together a new coalition and rebuild his parliamentary majority.1.2163

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 11.47 points or 1.58% in Asia overnight. South Korea and Hong Kong topped losers, each falling more than 2%. The sell-off also caused Japanese stocks to slip 1% and Chinese blue-chips to tumble 2%, their biggest one-day loss since Sept. 9.

All had touched milestone highs earlier this month.

Gold prices edged lower. Spot gold dropped 0.2% to $1,850.63 an ounce. U.S. gold futures settled down 0.2% at $1,850.90.

U.S. crude oil futures settled at $52.61 a barrel, down 16 cents or 0.30%. Brent crude futures settled at $55.91 a barrel, up 3 cents or 0.05%.

(Reporting by Matt Scuffham; Editing by Dan Grebler, Mark Heinrich and Sonya Hepinstall)

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Current cryptocurrencies unlikely to last, Bank of England governor says

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Current cryptocurrencies unlikely to last, Bank of England governor says 2

By David Milliken

LONDON (Reuters) – No existing cryptocurrency has a structure that is likely to allow it to work as a means of payment over the long term, Bank of England Governor Andrew Bailey told an online forum hosted by the Davos-based World Economic Forum on Monday.

“Have we landed on what I would call the design, governance and arrangements for what I might call a lasting digital currency? No, I don’t think we’re there yet, honestly. I don’t think cryptocurrencies as originally formulated are it,” he said.

Bitcoin, the best-known cryptocurrency, hit a record high of $42,000 on Jan. 8 and sank as low as $28,800 last week, far greater volatility than is found with normal currencies.

“The whole question of people having assurance that their payments will be made in something with stable value … ultimately links bank to what we call fiat currency, which has a link to the state,” Bailey said.

The BoE, like the European Central Bank, is looking at the feasibility of issuing its own digital currency. This would allow people to make sterling electronic payments without involving banks, as is currently possible with banknotes, and would in theory help avoid the volatility that renders bitcoin impractical for commerce.

Bailey said the appropriate level of privacy for digital currencies was likely to be hotly debated and was potentially underrated as a challenge in setting one up.

“This is a big one that is coming on to the landscape, the whole question of a privacy standard for transactions made in any form of digital currency, and where the public interest lies,” he said.

(Reporting by David Milliken, editing by Tom Wilson and Alistair Smout)

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EU sustainable investment rules need better corporate data – banking report

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EU sustainable investment rules need better corporate data - banking report 3

By Simon Jessop and Kate Abnett

LONDON (Reuters) – European Union rules aimed at defining sustainable investments should help reduce “greenwashing” by businesses, but better quality corporate data is needed to ensure they work effectively, a banking report said on Tuesday.

The sustainable finance rules will classify investments that can be marketed as sustainable, a move aimed at steering much-needed cash into low-carbon projects to deliver the bloc’s climate goals.

From January to August 2020, 26 of the region’s biggest lenders tested the EU framework across a range of core banking processes, including retail banking, trade finance and lending to smaller companies.

As the main providers of finance to companies across the EU, the ability of the banking system to track and report on whether corporate activities are sustainable or not could prove crucial in assessing the rules’ success or otherwise.

The lenders broadly welcomed the regulations as they seek to align their businesses with the transition to a low-carbon economy, the report by the United Nations Environment Programme Finance Initiative and the European Banking Federation found.

However, they also raised a number of issues, many of which were data-related and could require a phasing in of reporting requirements.

While many large companies are already required to disclose certain environmental and social information by law, the bulk of smaller and mid-sized banking clients are not, hampering banks’ assessment of their alignment with the rules.

Concerns over the quality, detail and standardisation of data is also an issue when looking at banks’ lending overseas, something that would be made more complex as other regions launch their own regulations.

The banks who tested the EU rules called on regulators to seek global alignment of regulations, and for better tools to manage data from clients, such as a centralised EU database.

While under no compulsion to lend to activities that can be classed as sustainable, banks see sustainable finance as a growth area that is likely to take on more importance in coming years should policymakers tighten environmental legislation.

With more investors globally looking to become shareholders of companies with a good record on managing environmental risk, banks are also likely to look to reduce their exposure to environmentally or socially harmful activities over time.

The European Commission is expected to finish the section of the rules covering climate change in the coming months, before they take effect in 2022.

(Reporting by Simon Jessop and Kate Abnett; Editing by Pravin Char)

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