Save thousands by claiming commercial property depreciation
BMT Tax Depreciation
Commercial building owners remain unaware of the taxation benefits their property can generate. One of the most beneficial, yet often missed deductions available is building depreciation.
As a building gets older and items within it age, they depreciate in value. The Australian Taxation Office (ATO) recognises this and allows property investors to claim deductions relating to the wear and tear on buildings and the plant and equipment items within.
Depreciation claims are the key to increasing cash flow from a commercial property.
Capital works deductions can be claimed on the structure of a commercial building so long as construction commenced after 20 July 1982. In cases where construction commenced before this date, depreciation can still be claimed on plant and equipment assets.
Often commercial property owners assume they are unable to claim depreciation or receive significant deductions because their property is too old. However, there are still significant depreciation deductions available on the plant and equipment assets contained within the property. Some examples of depreciable assets include carpets, air conditioners, blinds, hot water systems, light fittings, lifts, partitioning and bathroom accessories.
The following case study shows how depreciation assisted a commercial property owner to increase their cash flow. Mark owns a commercial office building, which was purchased for $1.1 million. He leases it to a tenant for $1,800 per week (totalling approximately $94,000 per year). His expenses (including interest, rates and management fees) total approximately $124,000 per year. The accpompanying tables show how Mark’s position changes, depending on whether or not depreciation is claimed.
Calculations based on the diminishing value method of depreciation
This example illustrates the benefits of depreciation. Mark improved his cash flow from this property by $231 per week simply by claiming property depreciation.
It is recommended for commercial building owners to contact a specialist to complete a depreciation schedule.
In commercial properties tenants are also entitled to claim depreciation on any fit-out they add to the property from the starting date of their lease, for example desks, shelving, fire-fighting equipment, security systems and carpet. Commercial building owners may also be able to claim depreciation on any assets installed and left behind by previous tenants once their tenancy has ceased. For this reason, working out who is entitled to claim depreciation for the assets contained in a commercial property can be difficult.
A specialist will always perform a site inspection to ensure both owners and tenants claim the maximum depreciation deductions from a commercial property.
For further information contact BMT Tax Depreciation on 1300 728 726 or visit www.bmtqs.com.au.