Common Tax Deductions for Commercial Strata-title Owners

AN ESSENTIAL PART of ensuring commercial property owners claim the maximum depreciation for their property is taking advantage of any common property deductions which may apply.

Owners of all types of commercial property owners are entitled to claim deductions for the wear and tear that occurs to the building and its fixtures. Depreciation deductions fall under two classifications:

  • Capital works deductions (division 43) for the building structure
  • Plant and equipment deductions (division 40) for the easily removable or mechanical fixtures and fittings found within the building

If a property such as an office suite, industrial unit, or warehouse in a multi-unit complex is purchased in a development controlled under a strata-title body (or a strata title scheme), additional depreciation deductions will apply.

This is because owners are entitled to claim a portion of the depreciation for structures and assets contained within the common, shared areas.

Australian Taxation Office Tax Ruling 2015/3 provides clarification as to how common property is treated for tax purposes including detailed definitions of the types of strata-title ownership, which are deemed eligible.

Common property areas and shared infrastructure in commercial buildings which may result in additional capital works deductions for owners who purchase a lot in a strata title building include:

Some examples of plant and equipment assets found in common areas of commercial properties which can be claimed as a depreciation deduction include:

It is important to note that owners can only claim common property deductions for their portion of interest in the structure and assets contained. This is determined by their individual unit entitlement as per the strata plan.

However, when claiming plant and equipment assets, the deductions can be quite substantial, particularly as depreciation rules (such as immediate write-off and low-value pooling) can be applied.

The following table provides examples of the deductions BMT Tax Depreciation found for the owners of two commercial property types purchased via a strata-title arrangement.

Bottom Line: Apart from engaging a Tax Depreciation specialist, investors considering purchasing a lot within a strata-titled commercial building should also seek professional advice from their Accountant and Solicitor.

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