Why Commercial Landlords & Tenants Should Claim Depreciation

STARTING A BUSINESS can be a costly venture, but there are ways to reduce the costs involved. And whether you own a commercial property or are leasing the building, you could be entitled to thousands of dollars in depreciation deductions.

Commercial property owners and their tenants are entitled to claim depreciation deductions for the wear and tear of the building structure via a Capital Works deduction, and for the plant and equipment assets contained within the property.

Capital Works deductions refer to the building structure and the items the Australian Tax Office (ATO) deem to be permanently fixed to the building such as bricks, walls and basins. The depreciation rate for Capital Works deductions will vary based on the type of property and its construction commencement date.

These deductions can generally be claimed by the property’s owner, rather than the tenant.

Then, there’s Accelerated Depreciation …

Plant and equipment assets are items that are easily removable such as carpet, blinds and shelving. These deductions are generally calculated using an effective life provided by the ATO and can be claimed using the prime cost or diminishing value method.

However, there are additional incentives that may be available for small and medium-sized businesses. 

Both property owners and tenants are eligible to claim depreciation for plant and equipment assets. Owners of the building can claim on assets they own while tenants can claim on any fit-out they install from the starting date of their lease. 

Plus, you may be able to Claim an Immediate Write-off

Depending on lease conditions, a tenant may be required to remove assets prior to vacating. In this instance, scrapping can be applied in which the tenant can claim any remaining depreciable value.

However, assets left behind by a previous tenant may also be available to be claimed by the property owner.

Bottom Line: Given both parties can claim deductions at the same time, it’s important for owners and tenants to contact a specialist Quantity Surveyor such as BMT Tax Depreciation, to request a tax depreciation schedule. 

A BMT Tax Depreciation Schedule lasts forty years, considers industry-specific legislation, provides a range of depreciation methods and includes a property inspection. The schedule is 100% tax-deductible; and allows owners and tenants to boost their cash flow.

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