Commercial Property Depreciation FAQs 

GETTING YOUR TAX IN ORDER can be an overwhelming task. But when you have a commercial investment property, it can seem even more complex.

We’ve compiled a list of the most commonly asked questions to highlight just how depreciation can help maximise your cash return on a commercial property.

What is depreciation?

As a building and its assets age, they depreciate in value. The Australian Taxation Office (ATO) legislation allows owners of income-producing properties to claim deductions for this wear and tear.

Commercial property owners and tenants can claim depreciation under two different categories – capital works (Division 43) and plant and equipment (Division 40).

Capital works deductions are available for the building’s structure and any permanently fixed assets such as bricks, mortar and windows.

The ATO advises that the owner of any commercial property in which construction commenced after 20 July 1982 is eligible to claim capital works deductions. However, if your property was built before this date there may still be deductions available to claim.

Plant and equipment assets are items that can be easily removed from the property such as hot water systems, air conditioners, exhaust fans and security systems.

Depreciation deductions for these assets are calculated based on the individual effective life of each item as set by the ATO and can be claimed by both owners and tenants. 

Owners are eligible to claim deductions for any plant and equipment assets they own. In certain instances, you can also claim any assets left behind by previous tenants. 

Why is depreciation important?

Owners and tenants can claim hundreds of thousands of dollars in depreciation deductions each financial year. These deductions reduce taxable income and improve cash return. This helps to offset the cost of owning a commercial property or operating a business.

Can a commercial building be too old to claim depreciation?

No, investment properties do not have to be new in order to attract a depreciation claim. Both new and old commercial properties will offer some depreciation deductions for owners and tenants – so it’s always worth seeking the advice of a Quantity Surveyor. 

A Quantity Surveyor will conduct the relevant searches to accurately determine the age of a building. This includes historical council searches regarding lodged development applications, as well as occupancy certificates and certified final inspections. 

Previous tax returns can also be adjusted if a property owner or tenant hasn’t maximised their depreciation deductions in past years. 

Can a building owner claim any renovations completed by the previous owner?

Yes, a Quantity Surveyor will estimate anything in the property that is part of a previous renovation and calculate the deductions accordingly. This includes items that may not be so obvious, such as … new plumbing, waterproofing and updated electrical wiring.

For capital improvements to qualify for the Division 43 building write-off, construction must have commenced within specific qualifying dates.

Can anyone calculate depreciation?

No, Quantity Surveyors are recognised under Tax Ruling 97/25 as one of the few professionals with the appropriate qualifications necessary to estimate construction costs for depreciation purposes. A Quantity Surveyor will inspect the property to make sure every deduction is claimed correctly.

What is the easiest way to claim depreciation?

The easiest way to claim maximum depreciation deductions is to arrange for a Quantity Surveyor to prepare a tax depreciation schedule for your property.

Bottom Line: Your Deprecation Schedule outlines all available deductions over the forty-year life of your property and charges a one-off fee. And that fee is 100% deductible. 

BMT Tax Depreciation has prepared tax depreciation schedules for commercial properties ranging from primary production, manufacturing, retail centres, mining, office towers, medical centres, traveller accommodation and more.

And they can do the same for you.

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