JUST BECAUSE 30 JUNE has been and gone, commercial investors and businesses don’t need to wait another financial year to obtain a tax depreciation schedule. Even if a schedule is ordered after the end of a financial year (FY), depreciation can still be back-claimed.
First, what is a tax depreciation schedule?
A tax deduction can be claimed for the natural wear and tear, or depreciation, of income-producing property and its assets over time. This applies to both commercial property investors and businesses.
A tax depreciation schedule, as the name suggests, outlines all the depreciation deductions available throughout the lifetime of a property or business’s fit-out.
As such, the schedule is prepared by a specialist quantity surveyor. It is a type of report that outlines depreciation deductions available each financial year.
What happens if a tax depreciation schedule is ordered after June 30?
Let’s say a commercial owner of a business owned an income-producing asset since February 2019 but didn’t order their schedule until August 2021. In this case, they can claim depreciation for FY 2019/20 and FY 2020/21. This is possible because a tax depreciation schedule allows them to adjust previous tax returns.
So, what’s the key message here? Even if the June 30 deadline has been missed, it’s not too late to claim depreciation. The only difference ordering before June 30 is that the 100% tax depreciation schedule fee can be claimed earlier rather than later.
Can businesses still take advantage of full expensing after June 30?
The temporary full expensing policy is in place until the end of FY 2021/22. Under this arrangement, a business can instantly write off the value of new assets purchased and installed between 6 October 2020 and 30 June 2022.
So this means that business owners still have plenty of time to take advantage of the temporary full expensing policy.
What if a commercial investor or business already has a schedule but has made a property improvement last financial year?
In this scenario, they must ensure they exploit the return from their improvement by having their current tax depreciation schedule updated. This is very simple to do and can have them reaping further benefits for years to come.
How can they tell the difference between an improvement and repair?
Improvements must be depreciated, while a repair can be claimed as an immediate deduction.
This space can be very grey as sometimes an improvement could be a result of having to make a repair.
There’s one fundamental question they must ask themselves when determining what something is classed as: “Have I improved this beyond its original state?”
For example, if the property owner replaced the building’s split system air-conditioning unit with a ducted system, this is an improvement and would need to be claimed using depreciation deductions.
But if they replaced part of a cracked tile, this would generally be classed as a repair and could be immediately deducted.
Bottom Line: As a Commercial property owner and business, you can easily determine if something is an improvement or repair by having a quick discussion with a specialist quantity surveyor such as BMT or your accountant. These scenarios are often assessed on a case-by-case basis so it’s important to get the correct advice.
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