Claiming Tax Deductions for the Construction of a Childcare Centre
The Numbers: Lucky Stars (Pty) Ltd
Type of Purchase
Commercial property owners can claim depreciation deductions for the building’s structure as well as any assets they own within their property. Because of this, Rosalie was eligible to claim depreciation on both the capital works (Division 43) and the plant and equipment (Division 40) assets installed during the construction and fit out at Lucky Stars (Pty) Ltd’s new location.
And because Rosalie is operating a small business with an aggregated turnover of less than $50 million [Lucky Stars (Pty) Ltd], she was also eligible for the temporary full expensing scheme. The scheme allows the company to write off the total cost of the plant and equipment immediately in the first year.
Based on just the cost of the fit out and the capital works depreciation, Lucky Stars (Pty) Ltd was able to claim $323,764 as their first-year deduction. With their tax bracket of 25%, this means they benefited from a cash return of $80,941!
As you can see from Rosalie’s scenario, tax depreciation schedules can significantly affect a business owner’s cash flow each year.
What sets commercial property depreciation apart from investment property tax depreciation is that commercial property owners and tenants can benefit from substantial tax deductions. So, if you don’t own your business premises like Rosalie and still undertook renovations and fit out the building, you can still claim:
- capital works deductions for the structural renovations; and
- deductions for any plant and equipment assets that you added to the commercial building.
Here’s How Much You Could Be Claiming
However, if you’re still feeling unsure about committing to ordering a depreciation schedule, we have designed a tax depreciation calculator to help you estimate what you could potentially claim on tax depreciation.
This is an accounting tool designed to help estimate and calculate the declining value of capital works and plant and equipment assets and relies on accurate figures to present accurate estimations.