Do not make the mistake of assuming that others know what they are looking for.

Did you hear the one about the Senate enquiry into two disappearing billiard tables?

These two tables used to be located in the parliament’s staff recreation area and when it was realised that they had disappeared a senate enquiry ensued to find out where they had gone and importantly $100,000 was spent to find the tables that had been sold for a sum total of $4,900.

How does that fit with you as a tax payer?

What this event does highlight is the fact that assets get added and disposed of every day in the property world. Sure items are removed and added with some people’s knowledge including the building managers and asset managers but more often than not this is where the information flow stops. The potential tax implications of this capital expenditure and disposal are often not considered, often missed or not maximised are events such as landlord contributions for fit outs and any reversionary depreciation opportunities.

If this information does make it to the accounts team, then often the information is incomplete or poorly described. What this means is that asset registers become large and unmanageable and there is therefore no way of clearly tracking the assets that are actually held and owned by the landlord. Overall this means that year on year depreciation diminishes in your tax schedules rather than rising and falling in line with the capex or replacement activity that naturally occurs with your assets. This exercise also makes the audit process easier across a whole portfolio basis.

A Napier & Blakeley health check focuses on your existing asset registers and tax depreciation claims. We highlight the opportunities for write-offs, reversionary depreciation, landlord contributions and even the initial basis of the depreciation claim. We do this because we know not everyone has the knowledge or even the time to do a whole asset review; we also know that in more than 80% of occasions we can significantly increase both the overall deductions available and also year by year returns.

Whilst it may have cost the tax payer over $100,000 to discover what happened to their (our) billiard tables, a Napier & Blakeley fee will be a lot cheaper yet so much more rewarding.

Finally you will always have to pay for capital expenditure and from a landlord perspective the costs of tenant incentives are always going to be around, by effectively claiming your depreciation and write-offs at least a little bit of the sting can be taken out of this expenditure.

Most accountants recognise that using a Quantity Surveyor saves time and money and puts you in the driving seat when it comes to good asset management; ask yours how they are making the most of the opportunities available to you.

Napier & Blakeley is the most relied upon Quantity Surveying firm in the matter of maximising the benefits that Tax Depreciation can provide to the bottom line, make us part of your good asset management.

Contact

Please contact us for our Property Tax data card.

Our strategic, cost effective advice will best position your property for the future.

Call Napier & Blakeley today if you want further information or regarding any other Napier & Blakeley services.

With the complexity and size of current new developments as well as their varying funding & delivery arrangements, our National Building Consulting team is undertaking an increasing number of Project Monitoring commissions for a variety of clients.

We are seeing a current trend of acquisitions of development property from international investors partnering with local developers – and more lately, from local property companies and superannuation funds. This is coupled with major corporates wanting anchor tenancies in new developments.

Project Monitoring is distinct from both Project Management and Construction Monitoring. Its primary role is to protect the Client’s interests by identifying and advising on the risks associated with acquiring an interest in a development that is not under the client’s direct control.

While we are traditionally engaged by an entity which enters into a commitment to lease or purchase a property upon completion, other entities (ie financial institutions, grant funders or end users) are seeing the benefits of our monitoring services which usually extend to independent, impartial & concise advice on the following:

• land & property acquisition matters
• statutory consents
• competency of the developer, its team and any project management systems
• financial appraisals
• development, finance, consultancy and construction agreements
• construction costs and programmes and
• design and construction quality

Our role is usually completed in two parts. Firstly, we would undertake an appraisal/audit of the project to identify those risks which would be relevant to our client and to report on these in an Initial Audit Report. Thereafter we traditionally monitor progress during the development process to ensure the developer’s duties under any agreements are discharged in a compliant & timely manner. We typically issue a monthly monitoring report which comments on all relevant commercial issues and contains a photographic illustration of physical progress.

New commercial office developments are typically marketed to achieve 6 Star Green Star and 5 star NABERS ratings. As NABERS is a performance based rating system the industry is, to a certain extent, still going through a learning curve in how to deal with the risks associated with acquiring property with an obligation for a particular rating which can’t be realised until perhaps two years after completion.

Our auditing and monitoring has identified risk weighted shortfalls or deficiencies in the process and procedures for modelling initial energy efficiency and tracking such against the design and construct process.

We’re also finding that typical agreement for lease specifications and performance requirements haven’t yet caught up with the green nature of the new developments. For example, traditional air conditioning design parameters provide for a comparatively low internal temperature range for a green building with low energy consumption targets. Where this is not checked and addressed the new owner may face the challenge of rising energy consumption and green ratings risks to avoid non lease performance and rent abatement.

Further, we too often find shortfalls or lack of procedures around operational readiness, adequate commissioning, handover and training of the building management staff. The sophisticated building management systems and green lease reporting requirements require well trained building managers.

As we tend to be more proactive than reactive in our role, we act as an early warning system for our client by anticipating potential issues and, by providing timely & accurate advice, we value add to the process by facilitating improvement in our client’s decision making competency.

Contact

Please contact us for our Project Management data card.

Our strategic, cost effective advice will best position your property for the future.

Call Napier & Blakeley today if you want further information or regarding any other Napier & Blakeley services:

Melbourne - Rob Howells	03 9915 6300	rhowells@napierblakeley.com
Sydney – Gavin Peach	02 9299 1899	gpeach@napierblakeley.com
Brisbane - Mike Fleming	07 3221 8255	mfleming @napierblakeley.com
Brisbane – Stewart Cavin	07 3221 8255	scavin @napierblakeley.com

Recently Napier & Blakeley completed a health check on a client’s existing depreciation claim.  In one tax year the client added $300,000 cash to their tax return. 

If we can do this to one years return what else could you and your investors be missing out on ?

Do not make the mistake of assuming that others know what they are looking for.

Napier & Blakeley are the original experts in property depreciation; would you trust your health to anyone but an expert?

Call us today to talk about your options.

“I pay whatever tax I am required to pay under the law, not a penny more, not a penny less”  Kerry Packer

Contact

Melbourne – John Mathew       0414 559 326        jmathew@napierblakeley.com
Melbourne – Neale Scott         0409 122 297           nscott@napierblakeley.com
Sydney – Tony Allen              0409 580 445             tallen@napierblakeley.com
Sydney – David Liddelow        0417 432 320        dliddelow@napierblakeley.com
Brisbane – Derek Linton          0409 722 709           dlinton@napierblakeley.com
Brisbane – Matthew Koppel     0439 765 589         mkoppel@napierblakeley.com

This should not be underestimated. In terms of commercial office property, lease end Make Good can equate to 75 to 120% of the rent per square metre and more under certain circumstances.

If left to the uninitiated a lack of repairs and maintenance will lead to reduced life expectancies of the building’s elements, plant and equipment – and in turn, premature capital expenditure for the replacement of such items.

This often leads to conflict and disputes which can complicate the tenant’s relocation or the landlord’s re-letting of the premises. In some instances this can also legitimately allow the landlord to claim loss of rent, rates and other associated losses which can be significant.

Proactive Strategy

There are a number of strategies available to protect your assets and avoid costly and timely disputes.

For the Landlord 

• Review lease covenants and seek advice
• Schedule the condition of the property at lease commencement
• Track and approve tenant works and retain details on file
• Monitor tenant’s repair and maintenance obligations and flag any shortfalls (via an interim schedule of make good or repair notice)
• Consider lease end Make Good early – 6 to 12 months prior to expiry
• Schedule and cost the Make Good works
• Gauge tenant’s response to physically undertaking the works
• Consider physical works versus cash settlement and appropriately account for risk
• Consider any tax implications of inherited fit out and write off for demolition
• Consider the tax implications of any incentives and ownership of fit out going forward 

For the Tenant 

• Review lease covenants and seek advice
• Schedule the condition of the property at lease commencement
• Plan and coordinate fit out works around the base building to reduce the Make Good
• Schedule and cost the Make Good obligation and account for such in line with Financial Accounting Standards
• Obtain written landlord approval to alterations throughout the lease term
• Repair and maintain the premises in accordance with the lease
• Consider future property needs and timing; weigh up benefit of cash settlement versus physical works

At Napier & Blakeley, we provide independent, professional advice in relation to repairs, maintenance and Make Good obligations throughout the lease cycle.

Our national team of Chartered Building Surveyors, Building Consultants, Services Engineers and Quantity Surveyors prepare cost effective, defensible reports to quantify the risks of Make Good and to maximise return on investment.

From over 25 years of business we have extensive data on Make Good costs which provide a quick benchmark comparison.

Please contact us at news@napierblakely.com for a copy of our Make Good Cycle data card. 

For further information contact:

Melbourne - Rob Howells            03 9915 6300             rhowells@napierblakeley.com
Sydney – Gavin Peach                02 9299 1899              gpeach@napierblakeley.com
Brisbane - Stewart Cavin           07 3221 8255                scavin@napierblakeley.com
Brisbane - Mike Fleming              07 3221 8255            mfleming@napierblakeley.com

One of the first steps is evaluation and gaining a better understanding of their existing portfolios, to make the best of what they’ve got – given constraints on availability of finance.  Typically the portfolios are older, B grade and ripe for opportunity.

 Strategic Asset Planning provides short, medium and long term views on minimising cost, managing risk and maximising returns through continued due diligence.

There is a positive trend towards this approach starting with understanding baseline data in terms of condition, performance and environmental and regulatory compliance in such a way that is cost effective, meaningful, useable and enduring.  It is vital to know what data needs to be collected and how it should be best used and managed for maximum effect.

The benefits of such strategic planning are instrumental to growth and can assist in improving the portfolio in terms of presentation, efficiencies, positioning, leasing, sales and returns.  Such planning is likely to include the following:

Napier & Blakeley form partnerships with property owners and managers to provide commercially oriented strategic asset management plans across all property sectors.

Our clients include:

• Aviva                      
• BlackRock                  
• Brookfield Multiplex    
• GE Capital               
• Local Government Super                               
• Motor Accident Commission 

Contact 

 Our strategic, cost effective advice will best position your property for the future.

Call Napier & Blakeley today if you want further information or regarding any other Napier & Blakeley services:

Melbourne - Rob Howells            03 9915 6300             rhowells@napierblakeley.com
Sydney – Gavin Peach                02 9299 1899              gpeach@napierblakeley.com
Brisbane - Mike Fleming              07 3221 8255            mfleming@napierblakeley.com
Brisbane - Stewart Cavin           07 3221 8255               scavin@napierblakeley.com

Napier & Blakeley Services:

• Technical Due Diligence
• Capital Expenditure Planning 
• Quantity Surveying
• Strategic Asset Management
• Building & Sustainability Consulting
• Accredited NABERS Ratings
• Accredited CBD Tenancy Lighting Assessments
• Property Depreciation

Over the past few years,

“Risky” has taken on a whole new meaning in the last few years and as we’ve talked about before you could have the best site in town, with an award winning design and 100% pre sales – but this in some instances still proved too risky for the banks in an uncertain market going forward.

To be fair to the banks, we are seeing increased lending activity in some sectors of the market, generally not large builds but certainly in the up to $20m market and more recently to a limited extent in the $20m to $100m sector with some isolated builds over $100m, so some of the banks, at least seem to have a developing appetite for deals.

A significant issue raised by a number of banks, is the quantum and quality of equity being put forward by developers with lenders wanting to see “real dollars” as a means of mitigating their risk further.

Obviously there are significantly differing market risks at play as we speak, with property markets across the country varying greatly in terms of rise or fall in value.

Melbourne has been pretty steady in terms of new development for us over the last two years.

Sydney has been through a substantial quiet time but now appears to be gaining some momentum with some lenders realising opportunity exists in certain physical areas where development has been scarce in recent years and as a result market pricing has held up and rental pricing has increased significantly.

South East Queensland is still problematic with the banks still holding many “difficult” loans on their books that may take some time to realise any value, let alone return on investment. General market sentiment, in particular business investment, remains weak as a result of a continued lack of confidence and the perception of a lack of credit in the system.

Now that the banks have started to relook at property lending in a more energetic way, there will also no doubt be some property workouts and possibly more developers placed in administration or receivership, with the banks now able to dissect their problems more analytically than over the past two and half years where there were so many problem parts of the economy, not just property.

There are (and always have been) other forms of capital available in the marketplace in the form of equity from private investors, large investment houses and in some cases offshore funds. We have also seen an increase in equity partnerships being offered by the larger contractors as a means of securing workload and as an attempt to avoid a competitive tender situation.

These sources of capital are traditionally more expensive to borrowers, but these lenders/equity participants traditionally enter into these markets as they see significant potential upside in some deals, not just on the debt/equity terms but also in the potential take out in markets that desperately need new property stock.

Where to now in terms of construction costs?

We will over the next few weeks release our updated construction cost data cards, looking at how costs have changed over the last 12 months and where they might be expected to go from here.

Contact 

Our strategic, cost effective advice will best position your property for the future.  Call Napier & Blakeley today if you want further information or regarding any other Napier & Blakeley services:

Melbourne - Craig Smith           03 9915 6300               csmith@napierblakeley.com
Sydney – Peter Hammond         02 9299 1899         phammond@napierblakeley.com
Brisbane - Paul Cosker             07 3221 8255            pcosker@napierblakeley.com 

• Quantity Surveying
• Capital Expenditure Planning 
• Technical Due Diligence
• Accredited NABERS Ratings
• Building & Sustainability Consulting
• Property Depreciation
• Accredited CBD Tenancy Lighting Assessments
• Strategic Asset Management

 Property Tax Deductions are available as follows:

• Depreciation of plant – such as air conditioning and mechanical ventilation, some electrical items, lighting, carpets, lifts, furniture and fittings. 
• Building Structure (Capital Allowances) for investment properties constructed after July 1982, or for refurbishment, renovations, additions alterations after that date.

Now answer these questions… 

1. Have you got a current depreciation schedule? If not Napier & Blakeley are qualified to establish values for the depreciating assets that you own.
2. Have you bought an investment property throughout the tax year?
3. Have you altered, renovated or added to your existing investment property throughout the tax year?
4. Have you demolished all or parts of your investment property?
5. Have you changed, added to or thrown out any items of fitout or FF & E during the financial year?

The establishment of a compliant depreciation schedule allows you to calculate your entitlements to Depreciation and Capital Allowances deductions and to manage the process of change to your asset. 

Many investors simply do not claim deductions and therefore – often unwittingly – forego benefits to free cash flow they generate. 

Napier & Blakeley were the first to introduce Property Tax assessments to the Australian market in 1985 and are still the leaders in this field. 

We can give you an estimate of your likely levels of deduction on your investment property with no charge or commitment, simply to show you the benefits that you may be entitled to. 

We are confident that you will then elect for a compliant schedule to be completed, enabling your accountant to incorporate for you to generate and defend all claims that you make. 

The payback period for our fees is usually a number of months of your initial claim, so it’s true value for money – so please give us a call and we’ll help you from there. 

Contact Call Napier & Blakeley today for assistance with your tax deprecition schedule or any other Napier & Blakeley services at any of our offices below: 

Melbourne - John Mathew         03 9915 6300             jmathew@napierblakeley.com
Sydney – Tony Allen               02 9299 1899                  tallen@napierblakely.com
Brisbane - Derek Linton           07 3221 8255              dlinton@napierblakeley.com 

Napier & Blakeley Services

• Technical Due Diligence
• Capital Expenditure Planning 
• Quantity Surveying
• Strategic Asset Management
• Building & Sustainability Consulting
• Property Depreciation 

Transitional Provisions Ending this Year

The current transitional provisions of the CBD program that require only a NABERS base building energy rating to be disclosed will end on 31 October 2011, with full mandatory disclosure requirements commencing on 1 November 2011.

From 1 November 2011, the Building Energy Efficiency Disclosure Act 2010 (BEED Act) requires corporations selling, leasing or subleasing certain large (>2000sqm) office spaces to register a full Building Energy Efficiency Certificate (BEEC), not just a NABERS rating.

What is a BEEC ?

The BEEC is comprised of three parts:  

1.   NABERS Energy base building rating
2.   Tenancy lighting energy efficiency assessment
3.   General energy efficiency guidance for building owners and tenants

The BEEC may be valid for up to 12 months, however will only be valid to the date of the expiry of either Parts 1 or 2 whichever occurs first, as Parts 1 and 2 individually may be valid for up to 12 months but may be completed at different times.

At the time of disclosure, the BEEC will need to be valid, current and registered on the publicly accessible registry on the CBD program’s website.

Importantly, both the NABERS rating and new tenancy lighting assessments take a significant amount of time to complete the assessment and certification process, so need to be undertaken and certified well before a need to disclose for advertising may arise to avoid the risk of non-compliance with the legislation.

What’s the difference?

The required BEEC now incorporates a tenancy lighting assessment. A CBD tenancy lighting assessment of a building is based on a methodical survey of the general lighting system installed in the tenant office spaces of a building (the system that is reasonably expected to be left in a tenant space when the tenant leaves and the tenancy fitout removed).

The NABERS base building rating requirements remains the same as the current transitional provisions, and still requires a full 12 months of building operational data to provide a valid accredited NABERS assessment. Note that a NABERS estimate or non-accredited assessment has no credibility in terms of the BEEC, it requires a current certified NABERS Energy base building rating.

The general energy efficiency guidance will be provided as part of the BEEC when issued.

Accredited tenancy lighting assessments

For a lighting assessment to be valid under the BEED Act, it must be performed in accordance with the new CBD Tenancy Lighting Assessment for Offices Rules, by a CBD accredited assessor.

The tenancy lighting assessments may be completed for all of the building, in which the total office space NLA is assessed, or for a selection of tenancies only within the building. Typically, an all building assessment would be undertaken if the building is being prepared for sale. Assessments of tenancies typically would be undertaken if these areas are to be advertised for lease or sub-lease.

The lighting assessment measures only the energy used by the lighting on an area basis. It does not assess or measure lighting output, quality or suitability of the lighting for use in offices.

Penalties for failure

Failure to disclose may result in civil penalties of up to $110,000 for the first day and $11,000 for each subsequent day may be imposed by a Court for each breach of a disclosure obligation. Alternatively, the Secretary of the Department of Climate Change and Energy Efficiency can issue an infringement notice of up to $11,000 for the first day and $1,100 for each subsequent day of non-compliance.

Further penalties may apply for various breaches of the CBD. Refer to the website for further information with links to the Act and subordinate legislation: www.cbd.gov.au

Have you got a CBD action plan?

Napier & Blakeley are experts in the provision of strategic property advice and can assist in getting your property ready for the demands of the full disclosure requirements.

Meeting the requirements for a BEEC in obtaining an accredited NABERS rating and tenancy lighting assessment for your building is time consuming and intensive, which many people underestimate, so be pro active and plan ahead.

The CBD accreditation and training process for performing tenancy lighting assessments is underway. It is expected that tenancy lighting assessments and hence full BEECs will be available from July 2011, so don’t leave it to the last minute to meet your mandatory disclosure requirements and organise a BEEC with a CBD accredited assessor.

Contact 

Our strategic, cost effective advice will best position your property for the future.

Call Napier & Blakeley today to ensure you are ready for the upcoming changes to this legislation on 1 November 2011 or if you want further information on the Commercial Building Disclosure, or any other Napier & Blakeley services please contact any of our offices below:

Melbourne - Rob Howells            03 9915 6300             rhowells@napierblakeley.com
Sydney – Gavin Peach                02 9299 1899              gpeach@napierblakeley.com
Brisbane - Mike Fleming           07 3221 8255             mfleming@napierblakeley.com

Napier & Blakely services:

• Accredited CBD Tenancy Lighting Assessments
• Accredited NABERS Ratings
• Technical Due Diligence
• Capital Expenditure Planning 
• Quantity Surveying
• Strategic Asset Management
• Building & Sustainability Consulting
• Property Depreciation

The past few years have thrown many challenges the way of private practice accountants, 

Napier & Blakeley, long recognised, as the market leader in property depreciation, see so many depreciation schedules that are not maintained as they should be. Assets that have long been removed from site still being depreciated and quite often representing large sums of money.
It is a regular occurrence and easy thing to do to simply adopt the vendors depreciation schedule. Tax law, however, allows a purchaser to apportion values to all depreciating assets they acquire, i.e air conditioning, lifts, carpet, chattels, etc to reflect the cost of the asset as acquired by the purchaser. In a rising market this may even represent a value that is more than its original replacement cost.

On a recent assessment of a property that was acquired by a client for around $85m, the apportioned value of depreciable plant was a staggering $24m more than the vendors written down value. The tax sheltered amount increased $18m in the first 10 years of ownership. Assuming a tax rate of 30%, the increased cash value in the first year alone was $720,000 with the ten year tax deferral being $5.4m.

Yes, It is tax deferral. Depending on the entity structures that hold the assets the eventual claw back amounts may defer but one thing is certain, the value of the dollar today is significantly more than the value of the dollar tomorrow! The opportunity to improve your LVR’s today and reduce your finance risk providing real cash flow to allow appropriate capex management of the asset is invaluable.

In most instances the sums are not small! So what dollars are you really missing out on?

Whether it’s not starting off on the right foot with depreciation or not having a close understanding of your assets when it comes to demolition or refurbishment of your assets there are many opportunities to make a real contribution from the low hanging fruit that good management of your depreciable assets can bring.

Don’t miss out on the benefits, contact Napier & Blakeley and let the industries original depreciation expert and trusted advisors help you to maximise your return this financial year.

Contact

If you want further information on tax depreciation, or any other Napier & Blakeley services please contact any of our offices below:

Melbourne - John Mathew    03 9915 6300           jmathew@napierblakeley.com
Sydney – Tony Allen           02 9299 1899               tallen@napierblakeley.com
Brisbane – Derek Linton       07 3221 8255              dlinton@napierblakeley.com

Napier & Blakeley services

• Technical Due Diligence
• Capital Expenditure Planning 
• Quantity Surveying
• Strategic Asset Management
• Building & Sustainability Consulting
• Property Depreciation

It’s here again, the end of the financial year,

Napier & Blakeley are the original experts in property depreciation deductions – we will make sure that you do muscle up and receive the maximum benefits available to you through depreciation and capital allowances.  Our experience is second to none in the market place and our track record speaks for itself.  So let us wrestle on your behalf.

It’s at this time every year that we provide an update of the legislative goings on in the accounting area of property depreciation and over the past 12 months there have been a few.

Firstly the much anticipated Green Depreciation Consultation paper was launched, Napier & Blakeley briefed on this paper when it was released in December. The paper provided allowances for “Green” related works that take a building of a 2 star NABERS rating or below to 4 star NABERS rating or above.

Essentially the scheme outlined was overly complex and did not provide any immediate relief to the tax payer, instead over burdening them with red tape. Submissions were to be provided at the beginning of the year and unsurprisingly the overall weight of submissions did not have anything favourable to say about the proposals. As a result the Government has delayed the scheme until 2012.

Other depreciation news relates to the an announcement in this years budget extending the value at which assets may be written of for small business to $5,000. There have also been some minor changes to the classification and effective lives on specific asset categories.

A major change not widely publicised is the requirement now for all Quantity Surveyors providing tax depreciation schedules including those carrying out inspections to be registered tax agents. Before this recent change there has been no requirement for a Quantity Surveyor to have any formal registration before providing a report of depreciation allowances. The tax practitioners board is yet to agreed the level of education and experience a “Suitably Qualified” individual requires to be engaged in the provision of tax depreciation schedule. Discussions on this subject are ongoing though you should be aware that all individual providers of depreciation schedules should be registered otherwise their reports may not be accepted by the ATO.

Napier & Blakeley’s main tax tip for the 2010/11 tax year is to not forget about your capital expenditure. The works that have taken place over the past 12 months can be many and varied whether it’s refurbishment of common areas or landlord owned contributions there’s almost certainly opportunities to increase the value of depreciation claim for this financial year. All too often though these costs are incorrectly treated, write off’s go unclaimed and end up living on you depreciation schedules for all eternity.

Don’t miss out on the benefits, contact Napier & Blakeley and let the industries trusted advisors help you to maximise your return this financial year.

Contact

If you want further information on tax depreciation, or any other Napier & Blakeley services please contact any of our offices below:

Melbourne - John Mathew    03 9915 6300           jmathew@napierblakeley.com
Sydney – Tony Allen           02 9299 1899               tallen@napierblakeley.com
Brisbane – Derek Linton       07 3221 8255              dlinton@napierblakeley.com

Napier & Blakeley services

• Technical Due Diligence
• Capital Expenditure Planning 
• Quantity Surveying
• Strategic Asset Management
• Building & Sustainability Consulting
• Property Depreciation