Review of the Ripehouse Advisory COVID-19 vs Australian Property Report

Posted on May 1, 2020 by admin

I recently took part in the Ripehouse COVID-19 survey along with 146 other industry experts and academics and have now been able to view the report in full. I commend the team for putting the report together, especially during such a fluid and evolving set of circumstances. Real estate is such a pivotal part of the Australian fabric and the report cuts through much of the typical media noise around the very real concerns homeowners and investors have alike for the trajectory of the property market.

The research asked several questions of the experts around the likely direction of property prices based on a framework which is very likely to almost exactly match the real word scenario. Thankfully that makes the opinions and information even more valuable.

The report was broken into a number of key areas and I’ve addressed five of them individually below;

When will property be hit hardest?

The consensus view was that it would likely be at least three must before we saw the evidence of any price movements within the data. Realistically, my view is that this the minimum time frame due to the lagging indicators and time it takes for a property to be properly marketed by the agents and for a settlement to take place and be report by the ABS, Core Logic etc. It remains to be seen if there will be some properties hitting the market with a shortage of buyers as suggested by REIWA President Damian Collins. I certainly think that opportunistic buyers will be active in the market and it’s a possibility that we’ll see extremely low transaction volumes but potentially a relatively balanced supply and demand equation. However, it’s likely that the buyers will be in the strongest negotiation position and certain locations and sectors of the market will suffer far more than others.

Which housing demographic is most exposed to COVID-19 Fallout?

The report found that 42% of respondents believed that lower socio-economic areas would be most impacted. In my opinion the definition of ‘exposed’ is interchangeable with ‘suffer(ing) hardship’. Those mostly likely to suffer hardship are property owners without a significant enough buffer to weather the storm. Active property investors in their accumulation phase are typically highly leveraged and this could force them into a position where they need to sell if their tenant isn’t able to pay rent. Of course, the freeze on mortgages from the banks provides some significant respite to those in that situation. The same issue of having a buffer is true for households. There’s enough evidence to show that even average households don’t sit on cash reserves that would enable them to go without employment for a month or more, with those in lower socio-economic demographics living much more week to week. Those employed in casual positions, and or in industries such as travel, hospitality and retail are likely to suffer disproportionately in my view.

Which state do you think will be hit hardest?

Around 73% of experts pointed toward NSW as the state most likely to be hardest hit. NSW has suffered the highest infection numbers and when combining this with a higher density than other states and a higher cost of housing, this makes NSW more venerable to cost of living pressures as unemployment increases.

Which property sector will be most impacted?

The report highlights that most of the identified sectors are likely to suffer, with retail, hotel, holiday homes and AirBnB style properties taking the brunt. Respondents were clearly most concerned by AirBnB properties in their comments. I’m included to agree with Damian in that those with flexibility to move back to a tradition rental model will minimise their losses and that holiday homes will suffer for the next little while, especially in regional areas with high unemployment.

Do you see upwards or downwards pressure on price?

This question was an interesting one that presented some interesting answers. The question asked about prices looking towards March 2021, so roughly 12 months’ time. Many commentators suggested prices would be the same, if not higher. My view is that it’s just a question of timing. There’s no doubt that the strong fundamentals pre pandemic will return, but it’s a question of whether 12 months is enough time. My view is that it’s possible, but 12 months is probably the earliest we could see prices rise unless we see a relaxation of lockdown and distancing measures before the end of middle to end of May.

The report shares some adroit suggestions on the suburbs most likely to be hardest hit and is well worth a read. No surprises that locations with a high exposure to short term accommodation and tourism are predicted to be hardest hit.

In summary, the report provides some excellent insights from industry experts and commentators, as well as policy suggestions to help the property sector remain robust, which is especially important given how import it is to State Government budgets and as a major employer of Australians.

As for how the crisis likely to impact the Quantity Surveying/Tax depreciation sector, it will be like many other industries that are reliant on transaction volumes such as real estate agents, conveyancers, pest and building companies etc. However, the data shows there’s a significant lag effect between the actual transaction and an investor contacting a quantity surveyor. This indicates that most of the ‘pain’ will likely arrive at least 3 months after the market starts to move. Unfortunately, that exposes companies with pipelines that lag the market as much of the support nets such as Job Keeper arrangements are set to expire in September. Hopefully the curve continues to flatten, and our rates of infection continue to decline, and we don’t suffer localised outbreaks as we begin to relax the lockdown measures. The best news for the real estate sector is a swift and safe return to normality as soon as possible.

Mike is interviewing Ripehouse Advisory CEO Jacob Field on a live webinar on Wednesday the 6^th of May at 7.30pm. Register here for the event or a copy of the replay and we’ll get you a copy of the research paper.
https://event.webinarjam.com/register/7/yyvrgsv

Mike Mortlock is a Quantity Surveyor and Managing Director of MCG Quantity Surveyors. MCG Specialise in Tax Depreciation Schedules and Construction Cost Estimating. You can visit them at www.mcgqs.com.au/ Mike Mortlock is a Tax Depreciation expert, Quantity Surveyor and Managing Director of MCG Quantity Surveyors. He is a regular speaker and commentator having been featured in the Financial Review and Sky Business. MCG Specialise in Tax Depreciation Schedules and Construction Cost Estimating for investors. You can visit them at https://www.mcgqs.com.au/

Without COVID-19,we were going to be having a great year in Building!

Posted on April 29, 2020 by admin

If we compare the number of homes that commenced construction in 2018, compared to 2019, 2018 wins. In fact, the total number of homes that commenced construction in 2019 was 174,246.

The total number of new homes that commenced construction in 2019 was 22.6 percent lower than in 2018.

So, over the full year, 2019 was not as great as the previous year. However, as an industry, we had a lot to deal with.

Within the property sector, there does seem to be headwinds in some way, shape, or form each year. 2019 had it’s fair share though. We had the Financial Services Royal Commission handed down its findings, the Australian Prudential Regulation Authority (APRA) started the year with a firm hold on the industry, Federal and state elections were held.

Earlier in 2019, Geordan Murray, the HIA Senior economist had said, tax changes on property ownership, such as the opposition Labor Party is promoting ahead of the May 18 federal election, would only make the situation worse.

“State and federal governments should be looking at ways to sure up confidence in the housing market, for both owner-occupiers and investors,” HIA senior economist Geordan Murray said.

Then, on the 21^st May 2019, APRA, the banking regulator, proposed relaxation of lending restrictions.

Coupled with the Reserve Bankrolling out two consecutive interest rate cuts. Surely this would start to see the 2019 year improve. Surely this was the road back to recovery.

Martin Farrer, of The Guardian, published on the 16^th November 2019, What has caused the turnaround?

In his opinion, CREDIT.

“The simple answer is credit. Just as the downturn was caused by Apra’s 2017 decision to restrict credit amid alarm about poor lending standards, the upturn has coincided with a loosening of credit restrictions”.

The founder of SQM, Louis Christopher, says Apra’s post-election U-turn was crucial.

“With Apra, what they really did was, someone, knocked on their door and said, ‘Look, you’ve gone too far, we’ve got a downturn in the economy, you’ve got to loosen the lending restrictions.’ And they did.”

The second half of 2019 showed a marked improvement in housing market sentiment with suggestions that demand for new homes would return to growth going into 2020.

This month, on the 15^th April 2020, The ABS released building activity data for the December quarter of 2019, rounding out the full calendar year results.

Maybe we are back on track. In December 2019, leading indicators of building activity that showed an improvement in new home construction, there was a 1.2 percent increase in new home construction in the December quarter.

“There was a small increase in the number of new homes that commenced construction in the December quarter,” said Angela Lillicrap, HIA Economist.

“This quarterly increase at the end of 2019 was reported in both detached dwellings and multi-units, increasing by 0.1 percent and 2.9 percent respectively.

With December 2019 showing the number of new homes starting construction being just above the 40,000, we had not seen these low numbers since December 2013. With December 2017 being between the 55,000 and 60,000 mark numbers.

As we moved into the new year, a decade even, building approvals were on the rise.

“Building approvals increased by 3.9 percent in the three months to February 2020 compared to the previous three months, providing further evidence that the housing market was accelerating into 2020,” stated HIA Economist, Angela Lillicrap.

“Approvals strengthened across the board with both detached houses and multi-units experiencing quarterly increases of 2.9 percent and 5.4 percent respectively.

From this, we know that up until at least the end of February, home building activity across most regions for 2020 was looking at the improvement.

In seasonally adjusted terms, building approvals for the three months to February 2020 quarter showed:

Victoria (+22.6 per cent),

Western Australia (+1.1 per cent),

Tasmania (-7.3 per cent),

New South Wales, (-5.2 per cent),

Queensland (-4.9 per cent),

South Australia (-17.4 per cent),

Australian Capital Territory(+ 1.0 per cent), and

Northern Territory (- 6.7 per cent.).

From this, what I see is that we have a property market on the improvement. Then we welcome COVID-19 to our shores. Although we lock the door and do not want it to enter, it comes in anyway.

With various stimulus packages being rolled out, Government incentives to encourage support and continued employment, it is fair to say that the construction industry is still open for business.

The Australian Government was pledged $1.3 billion to support keeping apprentices employed, by way of a $21,000 per apprentice subsidized wage.

A month ago, HIA Managing Director, Graham Wolfe, said,

“The measures that the Government has announced will help many small businesses continue to operate in this uncertain environment.”

“As an industry that employs over 1 million people and injects billions into the economy, the residential building industry can play a key role in keeping the economy ticking over and lead the economic recovery that will happen once the virus passes,” concluded Mr. Wolfe

As I had noted earlier, one of the key drivers for the change from early to mid-2019 has been credit, or the ability to gain credit.

We now have more headwinds. 2020 is no different. It is not a royal commission, or a federal election, but a worldwide pandemic.

However, if the industry has access to credit and can continue to build, then we have a chance.

The value of lending to owner-occupiers (construction of new homes) in January 2020 has increased to 13.2 percent higher than back in April 2019.

Written by Marty Sadlier
Founding Director and Owner at MCG Quantity Surveyors

Are depreciation legislation changes affecting property investor behaviour?

Posted on April 25, 2020 by admin

Yes, yes they are. Or at least, it seems that way.

Now I’m tempted to just leave it there for my own amusement, but anyone that knows me will know I won’t be able to help myself in sharing the data I’ve crunched. Let me give you some background;

On the 9^th of May 2017 the then Federal Treasurer and now Prime Minister, Scomo, announced that anyone purchasing established residential investment properties (i.e. not brand new) after that date would no longer be able to claim plant and equipment item deductions. Plant and equipment represent a big slice of the overall deductions, especially in the first five years of ownership. Generally, in the first full year of claim it’s more than half of the total deductions.

I’m a big believer in incentives. I believe that humans will naturally follow paths that they’re incentivised towards. So where are the incentives leading people? In my view, they’re clearly leading them to purchase new property.

If you buy a brand-new property that’s always rented out, you’re exempt from the changes. Meaning that you can not only claim all the available building structure deductions, but you can claim those juicy, high depreciation rate attracting plant items. Things like;

Kitchen Appliances
Blinds and Curtains
Hot Water Systems
Pumps
Ceiling Fans
Air Conditioning
Bathroom Accessories
Exhaust Fans
The list goes on

So, there’s your background, now what about the data? I have to be a little cagey I’m afraid as we’re about to share some of this industry first data in a press release and whitepaper, but I can tell you that between November 2017 and December 2019 investors buying a brand new property have increased by just shy of 45%. To me, that marks a sizable shift.

Now there may be several other reasons why this has happened. Perhaps there’s greater education on the benefits of new properties, perhaps our data which only really comes from investors obtaining schedules is a little too skewed. Although on the latter point, we’ve checked it against big data from mortgage aggregators and it’s pretty darn close.

What can we surmise from this? I think it’s a key indication that whenever the rules around property investing change to skew the advantages in any direction, investors will likely follow. Of course, there are way better reasons to buy one property over another than the tax advantages. However, but one should not underestimate the power of the fear of the stick and the pleasure derived from the carrot.

Ensure your home is adequately insured

Posted on April 25, 2020 by admin

Please raise your hands if you have received the “Dear Local resident” letter in the mailbox offering you the free property appraisal on your property?

Yes, it appears we have all had one at some point in time. Today one of our staff brought in one such letter and showed it to me and asked: “Is that right, can they do that?”

What was surprising in the letter was the reference to insurance. The letter went on to note that most people are interested in the current value of their home so they can make financial decisions and …” to ensure that their home is adequately insured.”

Considering that this was also a free service, I had concerns over the validity and accuracy of such a report from a real estate firm.

A sales valuation or market appraisal is quite a different assessment of a property’s value, compared to an appropriate level of funds to replace an existing asset and in turn provide an appropriate level of cover for insurance purposes (including demolition, removal of debris, consultants fees, time escalations, etc.)

Some valuers do provide replacement cost valuations for insurance purposes. However, from a quantity surveyor’s perspective, we believe that their methodology is not entirely the most accurate way of determining the replacement value of a property.

While valuers might provide insurance assessments under their instructions from financiers or real estate agents, this figure is often little more than them applying an estimated rate per square meter of living area amount to calculate a construction cost estimate, then adding an arbitrary premium to cover the additional costs.

The figure can be even more inaccurate if you use one of those online calculators that pop up when you google the subject. I cannot stress enough how desperately wrong these can be, as they rely on averages and estimates that can’t possibly be captured via the owner’s best guesses and the click of a button.

The outcome of an inaccurate insurance assessment should be obvious.

At best, you are paying additional premiums to your insurance company to cover an outrageously high amount that you’ll never need to draw on.

At worst, you’ll be woefully underinsured and, after disaster strikes, you’ll find yourself having to cover the shortfall out of your pocket.

There is only one profession with the skillset to get this important figure correct – that’s right, quantity surveyors.

It seems that it is just not quantity surveyors that believe that valuers and real estate agents are not the best placed in providing these replacement valuations.

Jemma Castle of CHOICE recently penned an article titled ‘Property Valuations and price Estimates’.

Within this article, she provided opinions from Tyrone Hodge, chair of the Australian Property Institute.

“The most common method used for valuing residential properties is what’s called the direct comparison approach, where the property is compared to recent sales of similar properties in the area. However, in addition to using quantitative data sources (such as sales history) a valuer will also be making qualitative judgments about the property”, says Tyrone Hodge, chair of the Australian Property Institute.

“A valuer will also assess the current market and the direction they think it’s heading (is it stable or in decline?), whether there is an oversupply of housing, and what interest rates are doing”, says Hodge.

In addition to this, Jemma Castle also provided her opinion on the use of online calculators and their lack of accuracy.

“Price estimate sites use what are known as automated valuation models (AVMs) to determine an estimated value for the property. In our test, for example, of the six comparable sales used as a benchmark by the independent valuer, only one was the same as those used in the CoreLogic report (obtained through OpenAgent), and only two were the same as those in the APM report (obtained through ANZ). The CoreLogic and APM reports only used two common recent sales.” says Castle.

When Tyrone Hodge, chair of the Australian Property Institute, was asked the same question, he noted “What a statistical model doesn’t do is physically inspect the property, which makes it difficult to assess particular nuances which are likely to affect the sale price. While these models can provide a good guide for where a suburb may be heading, they won’t be able to assess the “nitty-gritty” of a specific property”, says Hodges.

In addition to both Castle and Hodges, Mr. Vince Mangioni, associate professor in property economics and development at the University of Technology, Sydney “agrees, saying an online estimate isn’t a valuation – rather, they’re price estimates and they provide indicative averages.”

To ensure my opinion that online calculators used by valuers and similar providers are just not accurate, I jumped onto the Budget Direct Website. This clearly notes before clicking on the link to use one of their calculators, “When buying home insurance, it’s up to you to determine how much it would cost to replace your home and contents if they were totally destroyed, for example, by fire.

These are called the ‘sums insured’ and are the maximum amounts we’ll pay. So it’s important you’re comfortable the sums you nominate are enough to replace the home and contents you wish to insure, at today’s prices.

Calculating these replacement costs is complex. To help make it easier, we’ve made available some calculators from leading estimators Cordell Information and Sum Insured.

(For a more accurate rebuilding cost estimate, we recommend you consult a professional valuer or building contractor.)

We have recently been asked to provide an insurance replacement cost valuation from a new client as they had previously engaged a valuer to complete the report.

This is one of the countries largest valuers and well respected.

However to the client’s disgust, after paying for the report and receiving the valuation, within the report it notes,

“Given the nature of the buildings, we recommend a quantity surveyor be engaged to confirm the insurance reinstatement cost.”

So although valuers are happening to complete these valuations and express their opinion of the replacement value, it appears that they are also disclaiming their opinion and recognising that the more appropriate profession to produce these reports is, in fact, a quantity surveyor.

Percentage of property investors with an ‘in-depth audit’ from the ATO

Posted on April 25, 2020 by admin

What percentage of property investors had an ‘in-depth audit’ from the ATO in 2019?

Last year the ATO announced that they doubled the number of in-depth audits to 4,500, due to an error rate of just under 90% on a sample of investor tax returns.

Speaking at the Tax Institute’s National Convention in Hobart, ATO Commissioner Chris Jordan said the Tax Office’s audits of over 300 rental property claims found errors in almost nine out of 10 returns reviewed.

To answer the question, the number of property investors receiving an ‘in-depth audit’ would be about 0.21%.

That number of less than a quarter of a percent is, in real terms, probably even lower as I’m looking at the latest stats on investors with an interest in a property which is from the ATO tax stats of 2016/2017. In that release, there were 2,156,319 individuals with an interest in an investment property.

Where are investors going wrong?

To keep this snappy, I’ll put in point form the key areas identified by the ATO.

Interest deductions – Incorrectly claiming interest on equity redraws for things like boats, cars, holidays etc. Only the interest portion of the loan on your investment property is claimable, and if you extend the value of the loan with a redraw, investors need to consider where that money is being spent. If it’s not attributable to an income producing property, you can’t claim it as a tax deduction.

2. Repairs and maintenance claims – Investors are claiming repairs and maintenance at 100% where these items don’t qualify. I’ve written extensively on this (https://www.mcgqs.com.au/blog/depreciable-asset-or-repairs-and-maintenance-how-to-make-the-call/) and there are some simple rules. Firstly, the property needs to be rented at the time of the expense. You can’t do some work to it while you’re living in it ready for the tenants, and then claim that as an expense. Secondly, if you’re replacing an asset rather than fixing something already in place, it’s most likely going to be a depreciable asset that needs to be written off over its effective life.

Holidays homes and AirBnB – The main issues relate to homes being let to family members, either for free or for a reduced rate. Owners also need to ensure they’re not claiming for periods when they are occupying the property themselves. The ATO has sophisticated data matching capabilities which means if you’re using AirBnB, the tax office will know about it.

So, the number of investors subjected to an ‘in-depth audit is very low in percentage terms, but it’s likely that these 4,500 investors weren’t just picked out of a hat. The data matching and benchmarking capabilities of the ATO are such that it’s my view those 4,500 investors had some very unusual figures plugged into their tax returns.

If you’re doing the right thing there’s nothing to worry about, but education is the critical component to ensuring your return is compliant. It’s important for investors to provide all of the information to their accountants, rather than just the basic statements and a shrug of the shoulders. Accountants are clever, but you can’t make diamonds out of, well… you know.

Mike Mortlock is a Quantity Surveyor and Managing Director of MCG Quantity Surveyors. MCG Specialise in Tax Depreciation Schedules and Construction Cost Estimating. You can visit them at www.mcgqs.com.au Mike Mortlock is a Tax Depreciation expert, Quantity Surveyor and Managing Director of MCG Quantity Surveyors. He is a regular speaker and commentator having been featured in the Financial Review and Sky Business. MCG Specialise in Tax Depreciation Schedules and Construction Cost Estimating for investors. You can visit them at https://www.mcgqs.com.au

Scrapping & Tax Depreciation – Writing off an asset

Posted on April 25, 2020 by admin

MCG QUANTITY SURVEYORS BLOG

Scrapping & Tax Depreciation – Writing off an asset

December 19, 2011, in Property Investing, Tax Depreciation, Tax Legislation

Previously I’ve written about how effective lives are determined, which gave a quick insight into the process of ‘scrapping’. In simple terms, scrapping is the process of throwing away an asset that has reached the end of its physical life. The benefit from a depreciation perspective is that the remaining written down value of the asset can be claimed at 100%.

Now this all comes with a few rules and disclaimers, and it’s important to understand a few key points.

1. The asset can no longer be used. In ATO speak;

“Once a taxpayer has scrapped or abandoned an asset, there is a presumption it can no longer be used by anyone for the relevant purposes. The scrapping of an asset demonstrates that the asset is either physically exhausted or obsolete. A taxpayer may abandon an asset if it is too difficult or costly to remove it from its place of operation.”

For example, you cannot remove a set of old curtains from one investment property, claim the residual value, and then install them in a new investment property and continue to claim depreciation.

2. In a newly purchased property, there must be an intention to rent the property as is.

To put it another way, the ATO has been quite clear that purchasing an investment property with the intention to renovate it immediately, does not fit their criteria for being eligible for scrapping deductions. If you were to purchase an older property and rent it out for a period, then decide to renovate, this is a different matter and would allow you to claim 100% of the residual asset value of items that have been thrown away due to obsolescence.

Let’s look at a small case study to examine some potential depreciation deductions from scrapping and a renovation.

A property investor purchases an older style property with some depreciation value left on the plant and equipment items. The property is rented out for two full years, and at the end of the third year, the kitchen is renovated with the cook top, dishwasher, oven, range hood and vinyl floor being removed.

Let’s assume the investors utilise the diminishing value method, are able to claim full financial years and just focus on the kitchen area.

You can see in the figure below that in the first two years, the property is returning $300 in the first year and then $245 in the second (you can see the effect of the diminishing method here).

Then at the end of the 3^rd year, they decide that the kitchen assets have reached the end of their useful life and are ready for the bin. They are able to claim 100% of the value left for each asset. So for the cooktop it is the opening value of $215 minus $35.8 minus $29.9 = $149.3.

Compare the total for the first two years against the scrapping year and you can clearly see a large benefit in scrapping the assets, even when we’re looking at an old kitchen.

In year four, you can now see that there is no claim for the original assets as they no longer exist in the property. As for the renovated assets, they were installed ready for use on day one of the fourth year and depreciate based on their purchased value and depreciation rates. It’s interesting to note that the scrapping year has almost as many deductions as the first year on the brand new assets.

It’s important to obtain a tax depreciation schedule to help identify the value of the original assets and ensure that the depreciation claim is handled correctly. If you’re about to undertake a renovation, the best practice is to have an inspection undertaken prior to the works being carried out. If you’ve already disposed of the assets, a Quantity Surveyor can work from prior photographic evidence.

Renovating for profit can be a great way to increase the value of a property. It is certainly a great way to achieve additional tax depreciation deductions.

Hopefully this provides you with a concise overview of the process of scrapping depreciable assets that have reached obsolescence. For more information, please don’t hesitate to contact me.

Percentage of property investors with an ‘in-depth audit’ from the ATO

Posted on March 30, 2020 by admin

What percentage of property investors had an ‘in-depth audit’ from the ATO in 2019?

Last year the ATO announced that they doubled the number of in-depth audits to 4,500, due to an error rate of just under 90% on a sample of investor tax returns.

To answer the question, the number of property investors receiving an ‘in-depth audit’ would be about 0.21%.

Where are investors going wrong?

To keep this snappy, I’ll put in point form the key areas identified by the ATO.

Interest deductions – Incorrectly claiming interest on equity redraws for things like boats, cars, holidays etc. Only the interest portion of the loan on your investment property is claimable, and if you extend the value of the loan with a redraw, investors need to consider where that money is being spent. If it’s not attributable to an income producing property, you can’t claim it as a tax deduction.

Holidays homes and AirBnB – The main issues relate to homes being let to family members, either for free or for a reduced rate. Owners also need to ensure they’re not claiming for periods when they are occupying the property themselves. The ATO has sophisticated data matching capabilities which means if you’re using AirBnB, the tax office will know about it.

Depreciation and the Instant Asset Write-off – Economic Stimulus Package 2020

Posted on March 12, 2020 by admin

Here’s what you need to know about the changes to depreciation allowances and the instant asset write-off changes as part of the Governments $17.6 billion coronavirus economic stimulus plan.

What has changed?

The instant asset write-off – The turnover cap and the asset value threshold have increased

The Government has committed $700 million to increase the instant asset write-off threshold from $30,000 to $150,000. On top of this, access to the write-off now includes businesses with aggregated annual turnover of less than $500 million. The cap was previously $50 million. As at the date of writing, this initiative will run until June 30 2020, but it would be an easy thing for the Government to extend

Using the simplified depreciation rules, assets costing less than the instant asset write-off threshold are written off in the year they are first used, or installed ready-for-use. This threshold applies to each asset irrespective of whether the asset is purchased new or second-hand.

Accelerated depreciation deductions – Anything over the threshold gets a 50% boost

Costed out at $3.2 billion, the Government has announced a time limited 15-month investment incentive which will run until the 30^th of June 2021. Businesses with a turnover of less than $500 million will be able to deduct an additional 50 per cent of the asset cost in the year of purchase.

Most of the assets Quantity Surveyors see will be under the individual $150,000 threshold anyway, so it’s likely we won’t encounter this too much, but it will happen with some major plant items in large facilities such as air condition and the like. A typical 20% depreciation rate would equate to 70% under this measure.

The efficacy of the instant asset write-off is well proven and it’s a sensible decision to encourage business investment.

These measures are part of a larger package to provide support to individuals and businesses across Austalia.

Ensuring your home is adequately insured – What you need to know

Posted on March 12, 2020 by admin