tax benifits on a billboard

hi guys i have a billboard that is returning $1500 a yr (in a rural area)
the land cost me $30,000 and payments are $60 wk and rates are $280yr what are the calculations for working out how much return im getting after tax benifits?
also can i claim depreciation on the billboard?

 

Your yearly income is $1500 and expenses are $3400 i.e. [($60*52wks)+$280], so you have a negative return of $1900. Assuming the $280 in rates is included, that amount should be tax deductible.

What kind of impact this has on your overall position requires more information around the amount borrowed, any capital growth and your own income.

I doubt that you could claim depreciation on the whole billboard, but any improvements to it may be eligible.

In the end assuming you had fully paid off the billboard your return would be just over 4%, which begs the question why not put this money into a term deposit or high interest savings account?

 

Just thinking, did you put the billboard in place or was it bought with the land originally? Can you factor out how much it cost?

 

i built it about 6months ago and it cost me about $1100,

 

Are you intending claiming the interest cost for the land ... merely because you place a billboard on it ?

Cheers,

Rob

 

Okay well I'm not an accountant, but the ATO would probably look at this sort of thing case by case.

You should be able to claim the cost of the billboard as depreciable. You would need to show cost though. I'd look at claiming back any council fees associated with signage approval too.

They'd probably look at land size etc. If the entire $30,000 worth of land is used only for advertising (not say with your storage facility as well) then you could be able to claim the whole lot as an expense.

Chat with an accountant.

 

thats what im not sure of ive talked to my accountant and he doesnt know(wont be using him anymore i think il find another that has investment properties )thats why i asked until i can find an accountant that knows or an invester here that has billboards and that has claimed.

 

Mate how I read it, is that as long as you're not using the land for anything other than the commercial use of advertising via the tangible asset of a billboard then you could deduct loan costs:

INCOME TAX ASSESSMENT ACT 1997 - SECT 25.25 Borrowing expenses

If you've got personal use for any part of the land you can only deduct the proportion of it used for investment purposes.

Seems fairly straight forward, but I'm not an accountant.

 

s.25-25 is about deducting the capital costs of establishing a loan that you use for earning assessable income, e.g. LMI on an investment loan.

The deduction for the billboard would also be a deduction over time. The issue to decide is whether it being permanently attached to land makes it a capital works depreciation (Div 43) or whether it is a form of plant and equipment that you can deduct over its useful life (Div 40).

I have my doubts that you could deduct your costs of holding the entire land just because you stick a billboard up.

The fact that deductions will far exceed income for the forseeable future indicates another intention for claiming, e.g. Fletcher's case.

The ATO may disallow the land interest deductions or else limit deductions to a maximum of the amount of income derived from the billboard !

Take all your details, including intended plans for the land, to an Accountant for an opinion.

Cheers,

Rob

 

I'm not sure that deductions far exceed income, bling you state that "payments are $60 wk" are these loan repayments or an interest only arrangement etc?

 

Ahh completely the wrong ballpark then, cheers.

 

thank you

interest only loan im to too worried about claiming all the interst i wasnt sure if i can claim depreciation for billboard as it is a structor but its not a house so there wont be much i can claim against it except maint.i just wanted to work out depreciation and tax benifits to see wether it was making me money or not even neutral as i have another block in mind for $40,000 and 100mtr frontage on main highway so i can put up another 2 if it is viable if not i will not buy that block. thank you for everyones feedback thats why this site is so popular im getting more info on here then ive got from half the accountants ive talked to keep it up!

 

I agree with Rob G. This is like the client who says because they have put signage on their car, the cost of running the car is now deductible.

 

This is interesting.

"The fact that deductions will far exceed income for the forseeable future indicates another intention for claiming, e.g. Fletcher's case."

The rental yield on the capital improved block is not at all out of kilter with what one would get if you put a house on it (about 5%).

So what is the difference? As long as the land was not put to any private use I don't understand why the whole thing wouldn't be deductable?

So would the interest on the land be deductible if it were making a profit? Sounds like the $40k block with 2 signs would get close to turning a profit?

 

the main thing is i want to keep the block if i can save some money on tax then in a couple of years il put a house on it but atm i cant, so id rather get something in the way of tax benifits then nothing at all and it sitting doing nothing which would be a bad investment and i may as well sell it so thats why im asking thanks guys