Hello! When I started my own small business, I didn't really give much thought to how I would pay tax. I mean, I realised that I would have to pay tax at some point, I just didn't understand when I would have to pay it or how much I would have to pay. I tried doing some research, but I soon discovered that tax is a very complicated business. One day, I got a letter from the tax office asking me why I had not filed a tax return for the previous year. I panicked and contacted a tax service. The tax service was great. The staff looked at my accounts and calculated exactly how much tax I would need to pay. This blog is all about the benefits of using a tax service.
Over time property tends to increase or decrease in value based on factors such as maintenance, additions, upgrades, and the market climate. Obsolescence occurs when the value of a property goes down due to these or other factors. Property owners can take advantage of obsolescence to lower their taxes and realize some savings. Here are some insights on the types of obsolescence that you should look out for in your commercial property and the ways you can leverage them to generate tax savings.
Types of property obsolescence
The value of a property can decrease due to various factors which can be categorized into the following:
Functional obsolescence occurs when a property no longer operates the way it was originally intended. For example, take a manufacturing facility whose design, equipment and operations were initially meant for manual operations. However, as technology advances, automation is adapted, and the facility is no longer utilized in the way it was intended. This qualifies as obsolescence, and it can be used to realize lower taxation amounts.
When the physical appearance and aesthetics of a property deteriorate over time, its value will decrease from what it used to be when the property was new and appealing. Wear and tear can also cause physical obsolescence of a property and its systems, warranting for depreciation which is an allowable expense against the taxable returns.
A commercial property may be unable to generate the expected returns due to influence from external factors such as economic recession. This qualifies as obsolescence as the property's value regarding the generation of returns will be reduced.
How to utilize obsolescence
Now that you know the forms of obsolescence that property can be prone to, you can use the knowledge to lower your taxes and generate some savings. Here are some tips on how you can achieve this.
Tracking the value of your property will help you identify any deterioration that could qualify as obsolescence. Find a surveyor who will assess the value of the property and help you prepare a depreciation schedule to indicate the accurate value of the property and the assets therein. This way you can give your jurisdiction an accurate value for taxation purposes.
As long as your property is aging and depreciating, you will not lack areas of obsolescence to take advantage of and get lower taxes. Assess any change in operations, market trends, demand for products and services, and other factors that may decrease the value of your property. Document them so that they can be reflected in your tax assessment.
It is worth consulting a tax expert who can help you leverage obsolescence, especially if you don't have the time, resources or expertise to do so.Share
20 December 2016