What are commercial plant and equipment depreciation deductions?

WHEN YOUR SPECIALIST QUANTITY SURVEYOR tells you that you can claim depreciation on almost anything, they mean it.

You can claim depreciation on items ranging from your commercial property’s walls, to smoke alarms and its mailbox … and even the kitchen sink. One of the most versatile areas of depreciation is plant and equipment deductions. 

Before diving into the details of plant and equipment, what is property depreciation? 

Property depreciation is the natural wear and tear of a building and its assets over time. There are two parts of a depreciation claim – the structural component (capital works) and the easily removable or mechanical assets (plant and equipment). 

What are plant and equipment depreciation deductions? 

As mentioned, plant and equipment assets are easily removable or mechanical in nature. Some common examples of plant and equipment assets found on a commercial property include: 

  • airconditioning & fire equipment
  • floor coverings (like carpet and vinyl)
  • furniture & demountable partitions
  • blinds & curtains
  • smoke alarms.
  • tools and
  • kitchen equipment.

How are plant and equipment deductions claimed? 

Having a tax depreciation schedule is essential to you claiming any type of depreciation deduction accurately. 

Plant and equipment deductions are claimed differently from capital works.

Capital works are typically depreciated at a set rate, while each plant and equipment asset is depreciated across its effective life using either the diminishing value or prime cost method.

When using the diminishing value method, the deduction is calculated as a percentage of the asset’s depreciable balance. This means the deductions are higher in the earlier years and diminish over time. 

Alternatively, under the prime cost method, the deduction for each year is calculated as a percentage of the cost.

If this method is used the deductions are not as high in the early years, and are spread out over time showing a more even claim per financial year. 

Are these deductions available for every commercial property owner? 

Commercial property owners often discount their ability to claim plant and equipment deductions due to their tenant installing their own fit-out.

But with over twenty years of experience, BMT Tax Depreciation has seen many still reap the benefits of plant and equipment deductions. 

Some of the most common plant and equipment assets a commercial owner can claim depreciation on include hot water systems, light fixtures, smoke alarms and air-conditioning systems.  

Bottom Line: It’s also important to remember that commercial properties aren’t impacted by 2017 depreciation legislation changes. This means an owner can claim depreciation on second-hand plant and equipment assets. 

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