Uncover Your Tax Benefits with Commercial Property Depreciation

DOES THE IDEA OF BUYING commercial property instead of renting your current business premises appeal to you? Or are you undecided whether to purchase a commercial investment over a residential property for your portfolio? 

It can be hard to understand the tax depreciation allowances that are available for investors of commercial property over those found for residential properties.

There are many rules which apply and the difference in depreciation found can vary significantly. By becoming more aware of commercial property depreciation, this can help you as an investor to make an informed decision.

Claim tax depreciation and still occupy the property

Many investors buy commercial property in their own name or as part of a self-managed super fund or company trust and then lease the property back to the business they own.

This enables the individual tax payer or super fund company, or trust to claim the tax depreciation allowance, which can be significant with commercial property. Here’s the great thing – it is totally legal. 

Older commercial buildings qualify for the building allowance

The building allowance refers to the decrease in value of the commercial property’s brickwork, mortar, concrete, etcetera. The date construction commenced, determines what building allowance you can claim. On non-residential properties the allowance is set at: 

Note: Traveller Accommodation, and Manufacturing properties do have different dates to those shown and can be claimed at 4% from 27 February 1992.

Claimable items vary by industry and effective life

Each year the ATO publishes a list of what assets you can and can’t claim. Commercial property owners don’t have their own list, but some assets are claimed at different rates to residential properties. For instance, carpets are claimed over an eight year period in commercial and a ten year period in residential. 

There are also industry specific assets that the ATO has detailed for depreciation claims. For instance, if you own a restaurant you will be able to claim items specific to your line of business.  BMT Tax Depreciation Rate Finder is an easy to use tool which can help you find out the effective life and depreciation rate for any commercial plant and equipment asset. 

The tax break helping you to improve your cash flow

In a move that will help boost cash flow for owners of small businesses, the Senate recently passed legislation to extend the $20,000 instant asset write-off to June 2019. Initially introduced in May 2015, the Australian government originally allowed small businesses with an agregated turnover less than $2 million to claim a $20,000 instant asset write-off. 

In March 2017, as part of Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016, the definition of a small business was extended and the $20,000 instant asset write-off was extended to include those enterprises with an aggregated turnover of less than $10 million.

During the 9th of May 2017 federal budget, the instant asset write-off was extended until the 30th of June 2018. In 2018, the federal budget proposed to extend the legislation once more and after a long delay between May and September, the extension of the legislation was passed by the Senate on the 12th of September 2018.

The larger the building, the more you can claim

Building height can play a role in the amount of depreciation that can be found for the owner of a property. Taller structures tend to attract higher deductions due to the fact that there is greater capital works expenses involved in the construction of the building.

Multi-storey buildings also often have common property assets such as lifts and fire services which can result in plant and equipment depreciation being available for the owner to claim. Some commercial properties may even include swimming pools, gyms, or even less obvious items like intercom systems.

Overall, these plant and equipment items translate to additional depreciable value for the property investor.

Bottom Line: The ATO recognises Quantity Surveyors as one of only a few professions which possess the required construction costing skills to calculate the cost of items for the purposes of depreciation. 

If the original costs of construction are unknown, have a qualified Quantity Surveyor, such as BMT Tax Depreciation help estimate the costs for you. A Quantity Surveyor is a qualified professional who specialises in building measurement and estimating the value of construction costs.

Why Choose a Depreciation Expert?

IT IS WELL KNOWN that you can claim wear and tear on a business vehicle. But do you know exactly how much wear and tear you can also claim, on your investment property?

You see, many property investors are unaware how significant the tax depreciation deductions their investment properties hold – meaning they could be missing out on thousands of dollars. [Read more…]

6 Ways to Enjoy Your Extra Cash from Depreciation

AS AN A INVESTOR, once you start claiming depreciation, you’ll notice a big improvement in your cash flow.

That’s because depreciation effectively lowers taxable income – and that means more money back in your pocket come tax time.

For most investors, the extra cash goes into savings. Or is put towards a holiday, or a new car. Or simply used for everyday living expenses.

However, there are far smarter ways to use the extra cash you gain from depreciation. And here are just a few. [Read more…]

Freehold Vs Leasehold – What Does This Mean for Depreciation?

LET’S USE HOTELIERS as an example. When they request a tax depreciation schedule for their property, there are usually three main scenarios:

  1. Freehold, which is where the client owns the building only, not the business that operates from it.
  2. Leasehold, where the client owns the business only, not the actual property.
  3. The client owns both the business and the building.

[Read more…]

5 Tax-time Tips for Commercial Property Owners


With tax time upon us, many property investors will be preparing to visit their Accountant to complete their annual income tax assessment.

Getting your tax in order can be a confusing task at the best of times, but when you’ve got a commercial investment property, it can get even more complex. [Read more…]

Depreciation: The Rules May Change … But Your Goals Remain The Same


THOSE OF YOU considering the purchase of an investment property often ask whether a commercial or a residential property will provide them with more deductions in the form of depreciation.

As you will appreciate, there are many important factors an investor needs to be aware of – when making your choice between these two investment options. [Read more…]

The 9 Experts You Need on Your Investment Team


AS YOU HAVE gathered, BMT’s main focus is helping investors claim maximum property depreciation deductions. Yet as Chris Lang recommends, we also recognise the importance for property investors to have their own team of trusted experts in place. [Read more…]

New Depreciation Legislation for Australian Property Investors


IN ONE OF THE most dramatic changes to property depreciation legislation in more than 15 years, Parliament has passed the Treasury Laws Amendment (Housing Tax Integrity) Bill 2017 as at Wednesday 15th November 2017, with the Bill now legislation. [Read more…]

Why Shopping Centre Owners Should Try on Depreciation for Size

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THE FACE OF RETAIL has changed dramatically in recent years.

With the rise of online shopping, the arrival of international brands, climbing rents and challenging economic conditions … some shopping centres (and retail landlords) have started to feel the pinch as these factors affect their bottom line. [Read more…]

Is There an Industrial Property Revolution?

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IF YOU HAVE ever bought something online, you probably haven’t put much thought into the detailed process from purchase to delivery.

With the rise of online retailers such as Amazon, this process has become very systematic and sophisticated using a mix of advanced technology and human labour to pick, pack and send orders.

This process usually takes place within an industrial warehouse. [Read more…]

Are Childcare Centres the Next Big Thing for Investors?

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THE GROWING DEMAND for childcare centres is no longer just from parents jostling to get their kids on waiting lists.

It’s increasingly also coming from investors looking to get a slice of this burgeoning real estate market and to take advantage of the significant tax deductions available for this type of property. [Read more…]