fbpx

Tax Depreciation For An Industrial Property Tax Depreciation For An Industrial Shed Constructed In 2020

Case Study

Commercial Tax Depreciation


The details

 

  • The property contains an industrial shed constructed in 2020. The land comprises of 5,781m² with full access control, extended security, and infrastructure to fully support business operations.
  • The building was completed in 2020 currently managed through an owner-occupied lease.
  • The income for the building on an annual basis is estimated at gross turnover $190,800 (NSA of 1060 m² area x ARR of $180.00/m²). The expenses for the operation estimated at 65% (-$66,815) which results in a net profit before tax of $123,985.

 

The approach

In this tax depreciation example, the quantity surveyor applied three methods in the calculation of total depreciation – Small Business (SB), Prime Cost (PC) and Diminishing Value (DV) methods respectively.

Differing criteria, considerations and requirements apply to each method. Based on the data a decision on the best method to be consistently applied for tax depreciation is determined by the accountant in conjunction with the client, based on their circumstances.

 

The outcome

Claimable tax depreciation

In this example the Small Business method delivers the highest upfront tax depreciation and cash flow benefits.

Total Small Business – Division 40 & Division 43 tax depreciation claims

First year:              $684,931

Over 40 years:      $6,441,052

The tax depreciation for total operation, consisting of Division 40 (P&L) and Division 43 (B&M), total over a period of 40 years.

 

Cash flow benefit

The cash flow benefit calculated over a five-year period comparing the three methods are:

  • Small Business: $188,356
  • Prime Cost: $40,289
  • Diminishing Value: $10,385

 

5 Year Cashflow (Small Business Method)
No Depreciation Small Business Depreciation
Net Profit Tax @ 27.5% Net Cashflow Net Profit Small Business Depreciation Taxable Profit Tax @ 27.5% Net Cashflow
Year 1 123,985 (34,096) 89,889 123,985 (684,931) (560,946) 154,260 278,245
Year 2 123,985 (34,096) 89,889 123,985 123,985 (34,096) 89,889
Year 3 123,985 (34,096) 89,889 123,985 123,985 (34,096) 89,889
Year 4 123,985 (34,096) 89,889 123,985 123,985 (34,096) 89,889
Year 5 123,985 (34,096) 89,889 123,985 123,985 (34,096) 89,889
Total 619,925 (170,479) 449,446 619,925 (684,931) (65,006) 17,877 637,802
Benefit Year 1 188,356
5 Years 188,356

 

5 Year Cashflow (Prime Cost Method)
No Depreciation Prime Cost Depreciation
Net Profit Tax @ 27.5% Net Cashflow Net Profit Prime Cost Depreciation Taxable Profit Tax @ 27.5% Net Cashflow
Year 1 123,985 (34,096) 89,889 123,985 (29,301) 94,684 (26,038) 97,947
Year 2 123,985 (34,096) 89,889 123,985 (29,301) 94,684 (26,038) 97,947
Year 3 123,985 (34,096) 89,889 123,985 (29,301) 94,684 (26,038) 97,947
Year 4 123,985 (34,096) 89,889 123,985 (29,301) 94,684 (26,038) 97,947
Year 5 123,985 (34,096) 89,889 123,985 (29,301) 94,684 (26,038) 97,947
Total 619,925 (170,479) 449,446 619,925 (146,505) 473,420 (130,191) 489,735
Benefit Year 1 8,058
5 Years 40,289

 

5 Year Cashflow (Diminishing Value Method)
No Depreciation Diminishing Value Depreciation
Net Profit Tax @ 27.5% Net Cashflow Net Profit Diminishing Value Depreciation Taxable Profit Tax @ 27.5% Net Cashflow
Year 1 123,985 (34,096) 89,889 123,985 (37,762) 86,223 (23,711) 100,274
Year 2 123,985 (34,096) 89,889 123,985 123,985 (34,096) 89,889
Year 3 123,985 (34,096) 89,889 123,985 123,985 (34,096) 89,889
Year 4 123,985 (34,096) 89,889 123,985 123,985 (34,096) 89,889
Year 5 123,985 (34,096) 89,889 123,985 123,985 (34,096) 89,889
Total 619,925 (170,479) 449,446 619,925 (37,762) 582,163 (160,095) 459,830
Benefit Year 1
5 Years

It is clearly very important to determine the correct method to be used upfront as it may have a major cash flow impact on the business from year one where tax depreciation claims apply. This positive cash flow impact would not have been possible if the owner did not undertake this tax deprecation assessment.

Why choose Acumentis

Have one point of contact for all your client’s property needs.

Knowledge and experience

Our registered team of professionally certified valuers are experts across commercialresidential and rural and agribusiness property types. We know what depreciable items to look for ensuring that you get a comprehensive ATO approved depreciation schedule prepared by our certified Quantity Surveyors.

Value

We’ll provide you with one tax depreciation schedule that lasts up to 40 years of claim and the fee is 100% tax deductible. We can also undertake a retrospective tax depreciation schedule if you haven’t been claiming deductions so that you don’t miss the tax benefits.

National reach

Wherever you are in Australia a qualified Acumentis property professional is nearby. With over 300 property professionals working from 45 offices in metropolitan, regional and rural Australia our team have your property and tax depreciation needs covered.

Your team of
tax depreciation experts

State contacts
Matthew Shadbolt
Valuer
Canberra
Marty Creigh
Valuer
Newcastle
Daniel Carr
Valuer
Newcastle
Angus Cooke
Valuer
Inverell
Tom McDouall
Director - Regional Residential Operations NSW
Newcastle
Heath Craft
Valuer
Albury
Maria Ergos
Client Services Team Leader
Sydney Residential
Gregory Jordan
Valuer
Port Macquarie
Harry Morrow
Senior Valuer
Tamworth
Simon Mandile
Senior Valuer
Sydney
Emmanuel Ergos
Senior Valuer
Sydney
Justine Franklin
Valuer
Albury - Wodonga
Bryan Guest
Senior Director Advisory
Coffs Harbour
Amy Frankel
Regional Director
Port Macquarie
Tony Gorman
Director Valuations
Darwin / Perth
Amber Broughton
Valuer
Gold Coast
June Button
Valuer
Gladstone
Lara Watts
Valuer
Bundaberg
Scott Blanchard
Senior Valuer
Cairns
Dale Rohde
Senior Valuer
Cairns
Clancy Miller
Valuer
Townsville
Paul Krause
Senior Valuer
Mackay
Matthew Galvin
Senior Valuer
Toowoomba
Jack Macdonald
Associate Director
Roma
David Hosking
Regional Director
Cairns
Henry Brown
Director
Brisbane
Wayne Airey
Associate Director
Sunshine Coast
Alexandra Doneley
Senior Valuer
Emerald
Jany Pezard
Director - Valuations
Sunshine Coast
Michael Everingham
Valuer
Gold Coast
Joe Porter
Senior Valuer
Adelaide
Craig Farley
Valuer
Adelaide
Stephanie Costi
Valuer
Adelaide
Mark Robins
State Director SA
Adelaide
William Simmonds
Valuer
Hobart
Leon Sleiters
Valuer
Hobart
Harry Chapman
Valuer
Launceston
Harry Chapman
Valuer
Launceston
Joe Stansfield
Regional Director - Tasmania (North)
Launceston
David Duffield
Regional Director - Tasmania (South)
Hobart
Alexandra Churches
Regional Director - Victoria
Bendigo
Quentin Churches
Associate Director
Bendigo
Patrick Monaghan
State Director - Regional Operations Victoria
Gippsland
Curtis Borszeky
Senior Valuer
Perth
Mitchell Fraser
Senior Valuer
Busselton
Felicity Graham
Senior Valuer
Bunbury
Daniel Horan
Valuer
Perth
Rachel Kendall
Valuer
Mandurah
Michael Sinclair
Valuer
Perth
James Sholdas
Associate Director Valuations
Perth
Tom O’Sullivan
Associate Director Valuations
Perth
Kate Bingham
Associate Director
Perth
Ben Lamers
Director Acumentis Advisory
Perth
Aaron Hughes
Regional Director
South West WA
Scott Robinson
Regional Director
Mandurah
Richard Graham
Regional Director - South West
Bunbury
Mark Eaton
Regional Director
Albany
Damien Schifferli
Regional Director - South West WA
Busselton
Nathan King
National Director – Advisory, State Director – WA Operations
Perth
Matthew Shadbolt
Valuer
Canberra
Marty Creigh
Valuer
Newcastle
Daniel Carr
Valuer
Newcastle
Angus Cooke
Valuer
Inverell
Tom McDouall
Director - Regional Residential Operations NSW
Newcastle
Heath Craft
Valuer
Albury
Maria Ergos
Client Services Team Leader
Sydney Residential
Gregory Jordan
Valuer
Port Macquarie
Harry Morrow
Senior Valuer
Tamworth
Simon Mandile
Senior Valuer
Sydney
Emmanuel Ergos
Senior Valuer
Sydney
Justine Franklin
Valuer
Albury - Wodonga
Bryan Guest
Senior Director Advisory
Coffs Harbour
Amy Frankel
Regional Director
Port Macquarie
Tony Gorman
Director Valuations
Darwin / Perth
Amber Broughton
Valuer
Gold Coast
June Button
Valuer
Gladstone
Lara Watts
Valuer
Bundaberg
Scott Blanchard
Senior Valuer
Cairns
Dale Rohde
Senior Valuer
Cairns
Clancy Miller
Valuer
Townsville
Paul Krause
Senior Valuer
Mackay
Matthew Galvin
Senior Valuer
Toowoomba
Jack Macdonald
Associate Director
Roma
David Hosking
Regional Director
Cairns
Henry Brown
Director
Brisbane
Wayne Airey
Associate Director
Sunshine Coast
Alexandra Doneley
Senior Valuer
Emerald
Jany Pezard
Director - Valuations
Sunshine Coast
Michael Everingham
Valuer
Gold Coast
Joe Porter
Senior Valuer
Adelaide
Craig Farley
Valuer
Adelaide
Stephanie Costi
Valuer
Adelaide
Mark Robins
State Director SA
Adelaide
William Simmonds
Valuer
Hobart
Leon Sleiters
Valuer
Hobart
Harry Chapman
Valuer
Launceston
Harry Chapman
Valuer
Launceston
Joe Stansfield
Regional Director - Tasmania (North)
Launceston
David Duffield
Regional Director - Tasmania (South)
Hobart
Alexandra Churches
Regional Director - Victoria
Bendigo
Quentin Churches
Associate Director
Bendigo
Patrick Monaghan
State Director - Regional Operations Victoria
Gippsland
Curtis Borszeky
Senior Valuer
Perth
Mitchell Fraser
Senior Valuer
Busselton
Felicity Graham
Senior Valuer
Bunbury
Daniel Horan
Valuer
Perth
Rachel Kendall
Valuer
Mandurah
Michael Sinclair
Valuer
Perth
James Sholdas
Associate Director Valuations
Perth
Tom O’Sullivan
Associate Director Valuations
Perth
Kate Bingham
Associate Director
Perth
Ben Lamers
Director Acumentis Advisory
Perth
Aaron Hughes
Regional Director
South West WA
Scott Robinson
Regional Director
Mandurah
Richard Graham
Regional Director - South West
Bunbury
Mark Eaton
Regional Director
Albany
Damien Schifferli
Regional Director - South West WA
Busselton
Nathan King
National Director – Advisory, State Director – WA Operations
Perth

How can we help you with your property needs?

Get in touch
  • Hidden
  • or call 1300 882 401