AS THE NEW YEAR BEGINS, many commercial property owners might be formulating their annual New Year’s resolutions.
Commercial property owners often think about the ways they can reduce the costs of owning their property and running their business. However, when they do so, the deductions they can claim via depreciation are not always top of their list.
Many commercial property owners still do not maximise the depreciation deductions available from their Commercial properties.
And this is a very good reason why they should add requesting a tax depreciation schedule to their annual resolutions for next year.
Claiming depreciation from Commercial properties can be quite complicated. There are many factors to consider, which can easily lead to incorrect claims being made and deductions not being maximised.
This is particularly true when property depreciation is involved.
To assist you as an owner of commercial investment properties, here are four tips on property depreciation to consider in 2015.
1. If a Commercial Property was built before 1982, it is not too old to claim depreciation
Both new and older commercial properties will attract some depreciation deductions. It is a myth that older properties do not attract a claim.
Although the Australian Taxation Office (ATO) places restrictions on claiming capital works deductions (depreciation for the structural element of a property, for example: roofs, walls and floors).
There are no date restrictions for claiming depreciating plant and equipment assets.
The ATO allows the owner of any commercial property (in which construction commenced after the 20th of July 1982) to claim capital works deductions.
Depreciation deductions for plant and equipment assets are calculated based on the individual effective life for each item, as set by the ATO.
Deductions for plant and equipment are also dependent on each assets condition and quality.
As these items are rarely the same age as the property (because they’ve been updated over time), there are often significant deductions available for plant and equipment depreciation claims.
2. Both Tenants and Owners are entitled to claim depreciation for any fit-out.
Commercial tenants are able to claim depreciation for any fit-out they add to a property, once their lease commences. This includes items such as desks, blinds, shelving, carpets, vinyl, fire fighting equipment and security systems.
If lease conditions mandate a tenant return the property to its original condition, they may also be able to claim a write-off for any remaining depreciable value available on scrapped assets.
However, this 100% deduction must be done in the same year as the item is removed from the property.
Any assets that a tenant leaves behind after the lease ends can also be claimed by a commercial property owner. Deductions for fit-outs can become very complicated, so it is important to consult with an expert.
3. Don’t Wait if you have only just purchased a property
Often commercial property owners will wait until the next financial year to claim depreciation deductions, if they have only just purchased a property.
However by doing so, you could miss out on valuable cash that can be particularly beneficial after outlaying substantial funds to secure the property.
Specialist Quantity Surveyors can use legislative tools (like immediate write-off and low-value pooling) to make partial-year claims more beneficial to property owners. Therefore, it is worth consulting an expert to find out what claims are available.
Commercial property owners can also claim the tax depreciation schedule fee straight back in the same financial year, if they arrange the schedule before the 30th of June.
4. Get an Expert to assess the property and perform a site inspection.
To ensure that the correct deductions are claimed, make sure to speak with a specialist Quantity Surveyor.
A Quantity Surveyor is one of the few professionals recognised with the appropriate qualifications to estimate the construction costs of a building for depreciation purposes.
They will inspect the property to make sure every plant and equipment asset is identified; and that claims for fit-outs are correctly noted for both the building owner (and the tenants) to claim.
Bottom Line: Depreciation schedules make the process easy for both the owners, tenants and their Accountants to claim the maximum deductions possible for each party.
