WITH the upsurge in rural property activity over the past year or so, the question has been posed: How many of the successful purchasers have fully maximised the opportunity on their acquisition by undertaking formal tax depreciation assessments, in essence picking up the unspent depreciation from the previous owners?
Herron Todd White national director for rural valuation, Tim Lane, says landholders should know a few key points about these assessments.
“Firstly, to comply with tax law, they can only be completed by a quantity surveyor who is also a registered tax agent,” Mr Lane said.
“They cover basically most infrastructure, and if applicable in a purchase, plant and equipment. The list of potential claimable items is longer than my arm,” he said.
From 12 May 2015 (budget night 2015), items of water development, fodder storage and fences were no longer allowed due to the accelerated depreciation that was brought in in last year’s budget.
“This means if a buyer bought prior to this date, they have extra benefits claimable,” Mr Lane said.
“The schedule of claim provided is a ten year assessment, so each year your accountant can simply bring across the latest number (unless you have say knocked down the item) and add this deduction to your tax return,” he said.
The fee to do this work was tax deductible.
Mr Lane said Herron Todd White valuers could collect the information required in conjunction with or independently to a valuation assignment.
“Typical mixed farming and cattle or sheep operations can see annual benefits in the order of $30,000 per annum, and further deductions are often available for more intensive assets,” he said.
“It is generally OK to go back for three years (i.e. to 2013 sales) on the basis that what was on site at the time can be substantiated. Imagine three years’ worth of $30,000 plus benefit in one year as such – each tax return would require adjustment, but you get my point,” he said.
The process to get such an assessment completed was fairly straight forward.
“If you have bought a property, financed a property for clients or do the tax returns for your clients and have not had recent purchases assessed for their claimable depreciation on acquisition, then you could be leaving a lot of opportunity behind,” Mr Lane said.
“With good seasonal conditions, sound to strong commodity prices and hopefully growing bank balances and profits, this option may prove very beneficial,” he said.