News & Updates

  • Richwood Accountants

Depreciation for Commercial Investment Properties

Here at Richwood we work closely with BMT Tax Depreciation to ensure that every deduction is maximised. Following is an article written by Bradley Beer, the CEO of BMT, regarding depreciation for commercial investment properties.

Depreciation is the natural wear and tear of buildings and assets over time. Commercial properties often hold thousands in depreciation deductions, however there are some significant differences between depreciation for commercial and residential properties.

1. Depreciation can be claimed under two categories

Depreciation deductions can be claimed under two categories. They can be claimed for the depreciation of the building structure known as capital works deductions, and for the plant and equipment assets.

Capital works deductions are available for any commercial building constructed from 20 July 1982. However, owners of older commercial properties shouldn’t rule out capital works deductions as most properties have undergone some form of renovation and also hold qualifying plant and equipment assets.

Deductions for plant and equipment assets will generally depreciate based on their effective lives as set by the ATO. It’s important to note that some assets used in one commercial industry may depreciate at a higher rate than they would in others. An example of this is carpets, which will depreciate at a higher rate in restaurants and pubs than in office buildings.

2. Both commercial owners and tenants can claim depreciation

A commercial property owner can claim depreciation on the building and any assets they own within it. Tenants in commercial buildings can also claim depreciation on any fit-out they install. This can include assets such as desks, blinds, shelving, carpet, vinyl and security systems.

If the tenant is required to return the property to its original state at the end of their lease, they can claim any remaining un-deducted value on the disposed assets.

3. Instant write-off and further depreciation incentives available for business owners

There are currently several depreciation incentives available for many Australian business owners that can maximise their cash flow.

The instant asset write-off threshold has increased to $150,000 and is extended to include businesses with an aggregated annual turnover of up to $500 million. This allows assets to be instantly written off as tax deductible, rather than depreciated over their effective life. At this stage, business owners can take advantage of this until December 2020.

The Backing Business Investment (BBI) incentive is also in place. Available until June 2021, this incentive significantly accelerates depreciation for new plant and equipment assets purchased by any business. With no asset threshold, the BBI incentive can unlock thousands in depreciation deductions sooner.

The method depreciation is accelerated under the BBI incentive differs between business types. Small businesses with an aggregated annual turnover of up to $10 million, and that use the simplified depreciation rules, can place assets to the general small business pool. This allows the business to deduct an amount equal to 57.5 per cent of the asset value in the financial year. In future years, the asset will be depreciated using the general business pool rules.

Businesses that have an aggregated annual turnover of up to $500 million and don’t use the simplified depreciation rules may be able to deduct a specified amount of the qualifying asset. The BBI incentive allows the business to deduct 50 per cent of the asset’s value in the financial year of purchase, in conjunction with the standard rate of depreciation calculated on the remaining value.

4. Consult with a depreciation specialist

Each commercial property is different. The best way for both commercial owners and tenants to claim depreciation is to consult with a depreciation specialist.

BMT Tax Depreciation makes it easy for commercial owners and tenants to claim the maximum depreciation deductions. Their comprehensive commercial tax depreciation schedules details every specific instant asset write-off, BBI incentive and low-value pool deduction available.

BMT Tax Depreciation has been trusted by commercial property owners and tenants Australia-wide for over 20 years. They have completed thousands of commercial tax depreciation schedules for all commercial property types including agricultural facilities, manufacturing, hospitality establishments and many more.

To learn more, Request a Quote or contact the expert team at BMT on 1300 268 222.

Article provided by BMT Tax Depreciation.

Bradley Beer (B. Con. Mgt, AAIQS, MRICS, AVAA) is the Chief Executive Officer of BMT Tax Depreciation