The past few years have thrown many challenges the way of private practice accountants, as well as those working within the property trust markets. Whether it’s been the rush of buying as we saw in 2007/08 period or the sell that has occurred in most recent times. It has been very hard to keep control and track of capital expenditure. It’s even harder when many never engage with the building or the people that manage assets directly. Now that we are in the world of hold and manage assets, it’s probably time to stop making do and to get engaged!

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

Napier & Blakeley services

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