Commercial tax depreciation has substantial benefits for both the landlord and their tenant (or lessor and lessee).
Whilst residential properties must be built after 15th September 1987 to qualify for claims of depreciation on the build cost, relative to commercial properties which can be built from 20 July 1982.
Purchase of an existing premises allows the purchaser to claim depreciation on not only the building itself but also the existing fit-out where a fit-out is already provided as part of the sale. Some examples of a fit-out that can be claimed:
- Office fit-out with suspended ceiling tiles, glazing, movable partitions, equipment including office furniture, air-conditioners and similar
- Mezzanine floor affixed to a warehouse including furnishings, floorings and structural member supports
- Industrial warehouse with refrigeration rooms and bespoke equipment for food manufacturing including conveyor belts and mixers
When leasing a commercial property, it’s always critical to organise a depreciation schedule on your new fit-out as well as the equipment that you have installed.
A quantity surveyor’s assessment has the key advantage of allowing you to accelerate the depreciation on your equipment by using higher depreciation rates which ultimately will boost your cash-flow for your business. Here is an example:
The fit-out cost is $100,000. If the office furniture was included in this, as the quantity surveyor has not assessed the value of furniture, the furniture can only be claimed at 2.5% by the accountant.
|Item||Approx. Value||Depreciation Rate||Year 1||Year 2|
In this example, the quantity surveyor has assessed the furniture and confirms the furniture is valued at $2,500. This entitles the investor to claim depreciation on furniture at an accelerated rate of 15.38%.
|Item||Value||Depreciation Rate||Year 1||Year 2|
Are you currently renting out a commercial property and do not claim depreciation? Give us a call.