Depreciation/Fit-out cost

[Matthomas]

Hi All,

First of all let me introduce myself as this is my first post on the forum.

I am close to become an entrepreneur in the food retailing sector. I am french and used to work for 10 years in the consulting ina management consultant but am now planning to start a food business in Sydney in the months to come.

I have a question for which I don't find any clear answers on the web. I would like to know whether I can depreciate in the P&L, and how, the fitout cost of a new shop (furnitures not equipement).

Thanks in advance for your responses.

Cheers,

Mat

[apj]

Hi Mat,

Welcome on board and congratulations on working towards your dream.

In answer to your question I have to qualify what I'm about to say by pointing out this is one of those times you need to get proper professional advice and this is general information only. Depreciation is a fiddly area and there are a whole bunch of possible outcomes depending on your profile and what you're buying.

Also, I am assuming you are talking about depreciating the fit-out for tax purposes rather than accounting purposes.

Fit-out costs can comprise a whole bunch of things ranging from walls and other fixed items, to large items of equipment, furniture and smaller items of equipment.

For all removable items, furniture and equipment you are able to deduct these outright (so the equivalent of an expense on your P&L) for tax where they cost < $6,500 each and you are a small business (turnover < $2 million). For items above that, these are thrown into whats called a general pool and depreciated at 15% in year 1 and 30% of the written down value each year thereafter. Some items can't go in the pool (like software, assets that are leased etc) and have to be depreciated under the normal rules.

For items that are considered 'capital works', generally standard walls, floors, doors etc. that don't perform a particular function in your business, these are deductible at 2.5% straight line over 40 years.

More information here http://www.ato.gov.au/businesses/con...=16#P452_27220

Generally people let their accountant worry about the depreciation as they have specialist software, plus the knowledge, to work it out reasonably quickly.

Hope this helps!

Cheers
Aaron

[FS Concierge]

G'day Mat,

Welcome to Flying Solo.

I'll look forward to hearing more about your new venture as things progress.

All the best,
Jayne

[ImprovisAsian]

I concur with APJ, Matt.

What an accountant would sometimes do, would be to use the services of a Quantity Surveyor (or Construction Economist, which is the same thing, just a fancier name) who would compile a tax depreciation schedule based on the costs and effective lives of the fitment items and actual capital works of the fitout.

I used to do that full-time when I first graduated, but no longer do it (I changed roles) but that service will typically cost you between $250 to $700 depending on who you go with and size/complexity of the fitout.

Hope that helps!

[Matthomas]

Thanks guys this really helps,

Cheers

Mat