Tax benefits 2020 featured image

Tax benefits for cabin set up for work

For business owners and employees

Working from a cabin in your own backyard has more benefits than escaping traffic and enjoying a slower morning routine, as a separate home office space could be 100% tax-deductible. Small business owners can use an instant asset write-off scheme and the employees working from home can also claim expenses related to their work.

Instant asset write-off for Business

Update after Federal Budget 2020 release. There will be no cap on each asset cost previously limited to $150,000 and extended till 30 June 2022. We will update the information below when the Government sources will be updated.

The Australian Government is supporting Businesses through COVID-19 by increasing the threshold for each asset to $150,000 (up from $30,000) until 31 December 2020.

So, if you have a business with an aggregated turnover of less than $500 million and if you can prove your asset is:

  • work-related and
  • costs less than $150,000 and
  • Purchased, installed and ready for use from 12 March until December 31, 2020.

You are eligible to use simplified depreciation rules and claim the immediate deduction.

As this Tax scheme excludes buildings, for a cabin to be classed as a ‘Plant and Equipment’, it would have to be a free-standing unit attached to the premise only for the cabin’s temporary stability. Building a cabin as a demountable or non-fixture structure will have no implications on Capital Gains Tax (CGT) in the future when you sell your home.

Update 6 Oct 2020: Capital Gains Tax exemption for Granny Flats set to commence on 1 July 2021, provided legislation passes Parliament.

Most of YZY Kit Homes backyard cabins in sizes of up to 20 m² will fit this tax scheme costing as low as $14,800 for a small cabin kit or fully installed 20m² cabin within $58,000 price range. As well as an office, cabins can also be useful for business-related storage shed, a workshop, maybe a portable gallery or space as a work-related purchase. Talk to your nearest cabins builder about the many possibilities. But before making enquiries, check with your accountant for professional advice first.

If you own a small business and need more space to improve your business, building a backyard cabin could be justified just like the other six most surprising items businesses claimed under the scheme. As long as you can adequately explain the usage of the item is work-related, even the latest Xbox, PlayStation and Nintendo games consoles, children’s pillows, doona covers and pyjamas, decorative wall hangings, bedding and night lights can be legitimately claimed.

It is a good chance to benefit from the tax incentive as the $150,000 threshold will reduce to $30,000 from 31 December 2020.

Tax deductions for employees

If you are an employee and are working from your backyard home office, work-related expenses may be claimed to reduce your income tax. Work-related expenses include the cost of using equipment and utilities. If you have an outdoor cabin built as a demountable structure, it may be classed as a piece of equipment and depreciated over time.

When using your separate backyard home office space for work only, you may be able to fully claim costs of the decline in value of other equipment and furniture in your workspace. Also, other expenses such as electricity and gas for heating, cooling and lighting, phone and internet and other running expenses, including computer consumables (such as printer paper, ink) and stationery.

But first, get professional advice specific to your circumstances to make sure you can reduce your tax with having a home office built in your backyard.

Information sources:

For Business

Instant asset write-off expansion: https://business.gov.au/news/instant-asset-write-off-expansion

Instant asset write-off for eligible businesses: https://www.ato.gov.au/Business/Depreciation-and-capital-expenses-and-allowances/Simpler-depreciation-for-small-business/Instant-asset-write-off/

Businesses given beefed-up asset write-off in $300m expansion: https://www.smh.com.au/politics/federal/businesses-given-beefed-up-asset-write-off-in-300m-expansion-20200608-p550j3.html

For Employees

Home office expenses you can claim: https://www.ato.gov.au/Individuals/Income-and-deductions/Deductions-you-can-claim/Home-office-expenses/

Employees working from homes: https://www.ato.gov.au/uploadedFiles/Content/IND/Downloads/Working-from-home.pdf

Capital Gains Tax exemption

CGT exemptions set to apply to granny flat arrangements: https://www.accountantsdaily.com.au/tax-compliance/14904-cgt-exemptions-set-to-apply-to-granny-flat-arrangements

Disclaimer

Information in this article is a general in nature and does not take into account your situation, is not a substitute for professional advice. You must not rely on the information in this article as an alternative to legal advice from your accountant, registered tax agent or other professional legal services provider. Please consult with a professional tax agent before the purchase.

Media release: 16-September-2020

Multipurpose garden studio Skyros in Armidale

Multipurpose room built in Armidale

A multipurpose cabin Skyros 19 is located just outside of Armidale. The studio will have multiple uses: as a student and teenage accommodation, also as a party room. The client is also an artist, and she wants to use it for her art studio as well.

Watch the interview with Martin Chaseling, the builder and take a virtual walk through the Skyros 19.

“Skyros 19 dark stained looks dramatic and it looks very at home in its landscape” – said Martin Chaseling, the builder servicing New England area.

Multipurpose garden studio Skyros in Armidale
Back of multipurpose garden studio Skyros Armidale

It’s probably something that you can get away within a cooler climate like Armidale, but a dark stain is generally not recommended for outside application. However, unarguably it looks spectacular!

“The clients are very happy with the cabin and that it features the double glazing on all doors and windows” – said Martin.

Panorama windows multipurpose garden studio Skyros in Armidale
Exposed beams multipurpose garden studio Skyros in Armidale

Project details

In this particular Skyros, there is installed under-floor insulation, as well as insulation and sarking in the ceiling. The other morning, we had a minus 8 degrees and we visited the site internally with no heating. It was quite comfortable, according to Martin.

Under floor insulation of Skyros, Armidale
Under floor insulation of Skyros, Armidale

“We incorporated a deck on this particular Skyros and the deck actually extends to the front of the building, and also goes around the side of the building. And the clients would like an outside bathroom, shower, toilet built on the side, which we will be doing shortly” – said Martin.

Decking front and side for external bathroom of Skyros
Decking front and side for external bathroom of Skyros

The newly added building is located about 10-15 meters from the main house and about 15-20 meters from the swimming pool. The Skyros cabin completed beautifully the outdoor area.

If you are looking to build a cabin or a granny flat in the New England region, please contact the builder of this project.

If you need an extra room built somewhere else, please find your nearest builder and contact him for a quote, site inspection or general information.

LGL laminated timber, glulam

Laminated timber vs Solid timber log homes

YZY Granny flats are made of glued laminated timber (LGL), also called Glulam. LGL timber has many advantages over the solid lumber and can also be more expensive than traditional timber. While smaller timber cabins would not justify the cost of laminated timber, larger buildings are worth considering the benefits of LGL. After all, the inside is what matters most in quality of the building.

Continue reading Laminated timber vs Solid timber log homes
Investment property Ibiza

Investment property Ibiza built by owner-builder

Nearing retirement Jim, a father of two young adults was looking for options to get his children into the property market. The family decided to purchase a block of land with an existing house and add a granny flat to double the income by renting two properties.

Continue reading Investment property Ibiza built by owner-builder
Dining living in luxury retreat Iceland

Luxury retreat Iceland built for father-in-law, Canberra

Retiree Ulrich has sold his house in Newcastle and built a luxury retreat Iceland at the back of his daughter’s family place in Canberra.

Watch the video interview with Ulrich and his son-in-law Richard and the reasons they chose YZY Kit Homes. Also, the builder for Canberra talks about the building side of this project.

Interview with the Homeowners and the builder

“In a lot of ways, this does not feel like a granny flat, the traditional granny flat being cramped, small and contained. It really feels like a very luxurious retreat, that you can live in forever.” – said Ulrich

Kitchen in luxury retreat Iceland
Kitchen full-length of the wall

Why build a granny flat?

“The genesis of this move was when the Federal government decided to allow people to put AU$300,000 back into their superannuation fund if they downsized” – said Ulrich. Downsizing contributions into superannuation were introduced as part of the government’s package of reforms to reduce pressure on housing affordability in Australia.

Ulrich looked around for a number of options to downsize. And after thorough research, building a luxury granny flat on his son-in-law and daughter’s property seemed to be the best option. There was a sufficient space on the block to put a granny flat in a backyard that would suit his needs. And then it was a decision which builder and what sort of granny flat to build. So, together with his son-in-law Richard, Ulrich started looking for a builder who could realize their plans.

Richard came across local builder Murray Fleming in Canberra, who has introduced Richard to the Scandinavian granny flats range made by YZY Kit Homes. Quality materials used in the building, quick construction time and ability to easily alter parts of the design were some of the great aspects of YZY Kit homes.

Veranda of luxury retreat Iceland
The veranda of Iceland

“This is not just an ordinary kit home. YZY kit homes made the transition and the ability to move different parts of the design without much of a fuss. It was very easy experience.” – said Richard.

Advantages of the Iceland design

One of the granny flat designs called Iceland was the perfect fit for the block. “We chose Iceland because of the large living area and the fact that had a large veranda and the doors open directly from the bedroom onto the veranda which appeals to me for summertime benefits. – said Ulrich. “The living area is really quite well structured. I have a kitchen the entire length of one wall and still have a big enough space to have quite a few visitors. I can have people for dinner and still not feel cramped.”

Luxury retreat Iceland
Luxury retreat Iceland
Bedroom doors open to veranda luxury retreat Iceland
Bedroom doors open directly to the veranda

“Another advantage of Iceland is that the ceiling height is really quite substantial and it means that it feels very spacious, much more spacious than the actual floor plan would suggest. So, that’s another advantage and it means you can have ceiling fans in every room” – said Ulrich.

Dining living in luxury retreat Iceland
Open plan living area
Lounge and dining in luxury retreat Iceland
Lounge and dining room

One of the other advantages of Iceland is it has 2 bedrooms. I could live in one as a bedroom and I could use the other one as an office/computer room. So, I can really spread out a bit and have my gear and my computer without being tucked in a corner somewhere.

Bedroom in luxury retreat Iceland
Bedroom in luxury retreat Iceland
Office room in luxury retreat Iceland
Office room in luxury retreat Iceland
Bathroom in luxury retreat Iceland
Bathroom in luxury retreat Iceland

The energy efficiency of the Iceland

“Now as the Iceland is built, I’m living in here and it is really comfortable place to live.” – said Ulrich. “The fact that it’s designed in a very cold European country means it is ideally suited for this climate. The double insulation in the roof, very thick timber walls, the double glazing on the windows and doors all mean that when I get up in the morning it’s still quite comfortable in here even I haven’t had any heating on; when I walk outside, it’s freezing.”

Richard recently had upgraded his main house with double glazed uPVC windows in order to try to bring in some more efficiencies. According to Richard, comparing the temperatures of the main house to YZY Kit home’s Iceland, there is a remarkable difference. The Iceland seems to hold the temperature more stable and keeps the comfort level during the night without the need to use the air conditioning.

Sloping block challenges and the solutions

The site where the Iceland would ideally suit the block was excessively sloping. On the lower side of this project, it required the piers/posts to be over 2 m height and they had to be braced. There was a retaining wall through the middle of the proposed building.

This presented quite a few challenges during construction. And we overcame that by using a steel sub-floor system. The design of the sub-floor spans a larger distance and allows to minimize the number of posts. Posts required quite deep holes and quite a lot of concrete. So, the steel sub-floor foundation was the most economical option for this project and also is termite-proof.

Steel subfloor system used for the sloping site

The orientation – getting the most out of the new dwelling

Richard decided to reverse the initial floor plan of Iceland to get the most out of the new building. By reversing it, the building took the Northerly aspect on to the veranda and the North Westerly into the kitchen allowing a lot of light into the living area. With the bedrooms to the South, South East. Which made it a better option for summer keeping bedrooms in a cooler aspect of the house.

The time it takes to build the Iceland

“It took us 2 days to build the steel sub-floor and 5 days to install the kit to lockup stage with windows and doors all on and roof secured.” – said Murray Fleming, the builder.

“That short construction time reduces intrusion into their backyards. People can carry on with their normal life prior to construction.” The quick construction pleases the clients because it has less impact on their day-to-day life. That not only keeps the client happy but also the sub-trades can come in and do what they have to do in a shorter time frame.

“Despite we had a challenging building site, we were fortunate that the client had a clear idea of what they wanted. This made it into a relatively easy job at the end of the day because of that. Richard and his father-in-law have a good taste in design and selected the color palette really well. This was something that enhanced the look of the building.

I am very happy with the result. We fulfilled the client’s aims and that is most important.” – said Murray.

If you are looking to build a granny flat in Canberra and surround areas, please contact the builder of this project.

If you need an extra room built somewhere else, please find your nearest builder and contact him for a quote, site inspection or general information.