When a commercial tenant first signs a lease to a building, often they will need to spend a substantial amount of money installing assets and fitting out the new space before they can open their doors for business.
The tenant might need to install a security system to keep the items they have for sale safe, partitioning may be required for offices or meeting and consultation rooms, a kitchen area might be required for lunch breaks and signage might be needed for the shop front.
Though businesses owners commonly install these and many other assets, they are often unaware they are entitled to claim them as a tax deduction in the form of depreciation.
What is Property Depreciation?
As a building gets older and items within it age, they depreciate in value. The Australian Taxation Office (ATO) recognises this and allows commercial building owners and tenants to claim deductions for the wear and tear on buildings and the fixtures and fittings within.
How Can I Claim Property Depreciation?
Depreciation can be claimed in two ways:
- As a capital works deduction for the wear and tear of the building structure
- As a depreciation deduction for all of the plant and equipment items contained within the property
What Business Assets Can I Claim?
The most common business assets installed during a fit-out that tenants can claim include:
- Lights and light fittings
- Air-conditioning units
- Firefighting equipment
How is Depreciation Calculated?
Calculating the depreciation available for commercial tenants can be quite a complicated process – particularly because commercial building owners are also entitled to claim depreciation on any assets that have been installed and left behind by a previous tenant.
It is recommended to contact a specialist Quantity Surveyor to complete a depreciation schedule. A Quantity Surveyor can provide two different schedules for the owner and the tenant which will outline the deductions available for each party.
Some lease conditions also mandate that tenants must return the property to its original condition once a lease expires. If a commercial tenant removes or disposes of any assets, they should also ask a Quantity Surveyor to complete a tax depreciation schedule to show the value of the items being scrapped. The tenant will then be able to write-off any remaining depreciable value as an immediate tax deduction in the year the asset is removed.
Get a Free Depreciation Claims Assessment
All Future Fitouts clients are entitled to a special reduced fee when ordering a depreciation schedule from BMT Tax Depreciation. Commercial tenants or property owners who would like a free, over the phone assessment of the deductions they can claim from depreciation in the lead up to the end of financial year should contact BMT Tax Depreciation on
1300 728 726.
Article provided by BMT Tax Depreciation.
Bradley Beer (B. Con. Mgt, AAIQS, MRICS, AVAA) is the Chief Executive Officer of BMT Tax Depreciation. Please contact 1300 728 726 or visit www.bmtqs.com.au for an Australia-wide service.