The previous few years have been challenging for the health care industry and medical centres in particular.
Issues with staffing shortages, COVID-19, and larger than normal patient numbers have resulted in rapid growth within the industry. In 2021 over 1.8 million people were employed in the health care and social assistance industry, which is projected to increase to more than 2 million by 2025.
Running a medical centre can be costly and often unpredictable. But one of the few constants to running a medical centre is property depreciation. BMT Tax Depreciation would like to remind businesses of the highly advantageous depreciation deductions available.
What is property deprecation?
Depreciation is the natural wear and tear of a building and the assets within it over time. The Australian Taxation Office (ATO) allows owners of income-producing properties to claim this depreciation as a tax deduction.
Capital works deductions (Division 43) are claimable on the building’s structure and assets permanently fixed to the property. Plant and equipment depreciation (Division 40) is claimable on assets which are easily removable from the property or mechanical in nature.
Medical centres hold many lucrative depreciation deductions in both capital works and plant and equipment deductions. Some examples of the commonly found capital works within a medical centre include car parks, flooring, and ducting for air-conditioning. Some of the commonly found deductions in plant and equipment within a medical centre include reception furniture, ECG machines, medical examination beds and more.
Here we will explore what types of depreciation deductions are available within a medical centre and how they can boost cash flow.
Case study: John Medical Centre
‘John Medical Centre’ is a general practice (GP) medical centre operating in Sydney. It has six consulting rooms and provides a range of health care services. The centre was purchased in 2018 for $2,800,000 and is owner operated.
the five-year cumulative depreciation deductions John Medical Centre are entitled to claim for capital works (Division 43) and plant and equipment deductions (Division 40) are as follows.
- Year 1: the owners will receive $33,913 in capital works and $62,902 in plant and equipment.
- Year 2: the owners will receive $33,913 in capital works and $50,871 in plant and equipment.
- Year 3: the owners will receive $33,913 in capital works and $33,758 in plant and equipment.
- Year 4: the owners will receive $33,913 in capital works and $23,469 in plant and equipment.
- Year 5: the owners will receive $33,913 in capital works and $15,998 in plant and equipment.
In this case because the business owns the building in addition to occupying it, it is entitled to claim both the capital works deductions and plant and equipment deductions.
The owners of John Medical Centre claimed depreciation on these commonly found assets and received significant deductions in the first five years.
- The five-year total depreciation found for an autoclave purchased for $5,995 is $4,572.
- The five-year total depreciation found for a defibrillator purchased for $1,950 is $1,707.
- The five-year total depreciation found for an ECG machine purchased for $2,295 is $1,969.
- The five-year total depreciation found for a medical examination bed purchased for $3,936 is $3,448.
- The five-year total depreciation found for reception furniture purchased for $16,936 is $14,837.
- The five-year total depreciation found for a telephone system purchased for $13,869 is $11,895.
Because John Medical Centre claim these depreciation deductions they can recoup some of the costly expenses involved in running a business and boost cash flow.
For over twenty years, BMT Tax Depreciation has been the most trusted specialist in the industry nationwide. BMT’s specialist site inspectors conduct physical site inspections, ensuring an accurate tax depreciation schedule is completed that maximises deductions and is ATO compliant.
To learn more about the advantageous depreciation deductions within a medical centre call 1300 728 726 or Request a Quote.
Bradley Beer (B. Con. Mgt, AAIQS, MRICS, AVAA) is the Chief Executive Officer of BMT Tax Depreciation. Please contact 1300 728 726 or visit bmtqs.com.au for Australia-wide service.