As a tenant of a commercial property in Australia, you might be surprised to learn that you can claim tax depreciation on certain items. This can significantly reduce your taxable income and put more savings in your pocket.
Let’s explore what tenants are eligible to claim and how it can benefit their business.
Requirements for Depreciation Claims
To be eligible to claim depreciation on your commercial property as a tenant, there are a few key requirements:
- The property must be used for income-producing purposes (i.e., operating your business).
- You must have installed the assets or completed the renovations yourself as the tenant.
- The assets must be depreciable under ATO guidelines (your quantity surveyor can advise on this).
- You must have records and receipts to substantiate your claims.
By meeting these criteria’s and working with a qualified quantity surveyor, you can ensure you’re claiming all the depreciation deductions you’re entitled to as a commercial tenant.
What Can Commercial Occupied Tenants Claim?
As a tenant of a commercial property, you can claim depreciation in the following areas:
Division 40: Plant and Equipment Assets
As a tenant, you can claim depreciation on Division 40 assets—also known as plant and equipment—that you install on the property. This encompasses a wide array of industry-specific items essential to running your business, such as:
- Commercial cooking appliances for restaurants
- Conveyor belts for manufacturing
- Specialised dental equipment for practices
- Fuel dispensers for service stations
Fit-Outs and Renovations
Any fit-outs or renovations you undertake as a tenant are also eligible for tax depreciation. This could include:
- Installing new flooring to refresh the space
- Upgrading the lighting for better ambiance
- Adding partitions or built-in furniture for functionality
- Renovating the storefront or facade to attract customers
To ensure you can claim the maximum deductions, keep detailed records and receipts for all the costs associated with your fit-out and renovation work. A quantity surveyor can then use these figures to prepare a comprehensive depreciation schedule tailored to your unique situation.
What Tenants Can’t Claim On Commercial Properties
Tenants are not eligible to claim depreciation on the building structure itself or any pre-existing items installed by the landlord. These capital works and existing plant and equipment deductions are solely claimable by the property owner.
How A Tax Depreciation Schedule Can Benefit You
Getting a tax depreciation schedule is crucial for tenants looking to maximise their depreciation claims on a commercial property. Here are some reasons why:
- Identify all claimable assets: A quantity surveyor will inspect the commercial property to identify every eligible asset the tenant has installed for depreciation, ensuring they don’t miss any claims.
- Proof of claims: The ATO requires proof of your depreciation claims, which a quantity surveyor’s schedule provides. This protects you in the event of an audit.
- Maximum deductions: A quantity surveyor will assign each asset its appropriate effective life and depreciation rate, allowing tenants to claim the maximum deductions permissible under ATO guidelines.
How A Tax Depreciation Schedule Helped Mark’s Restaurant Renovation
Let’s examine Mark’s scenario to better understand how a tax depreciation schedule can help tenants.
Mark rented a retail space to open a small restaurant. He invested $35,000 in new cooking appliances and cookware, $6,000 in tableware and furniture, and $3,000 in renovations to the front of the space.
Since Mark is a tenant of a commercial property, he can claim depreciation on the following:
- Cooking appliances and cookware
- Tableware and furniture
- Renovations as capital improvements
By claiming these deductions, Mark can significantly reduce his taxable income and improve his restaurant’s cash flow in the crucial early years of operation.
If you’re a tenant who needs assistance in claiming depreciation on a commercial property, don’t hesitate to contact our team at Duo Tax. With our help, you can claim every dollar you are entitled to.
Key Takeaways
- Commercial tenants can claim depreciation on plant and equipment they install to operate their business.
- Renovations and fit-outs made by the tenant are also depreciable.
- To be eligible, the property must be used for business, assets must be depreciable, and records must be kept.
- Getting a depreciation schedule from a quantity surveyor is key to maximising claims and substantiating deductions.
- Building structure and pre-existing items are not claimable by tenants.
