Commercial depreciation deductions can boost cash flows by thousands, hundreds of thousands, or even millions of dollars over the lifetime of a commercial premises.
Given that both commercial owners and tenants of the one property can claim depreciation, making sure assets are split up accurately can be difficult. Newly available incentives also further complicate the scenario.
The key to getting it right from the very beginning is a well-prepared tax depreciation schedule.
In this article we will explore:
Commercial tenant depreciation
Savvy commercial tenants, or business owners, can claim both capital works and plant and equipment depreciation on the fit-out and owned assets.
Applying industry-specific legislation to the tax depreciation schedule is essential to accurately determining depreciation deductions for both tenant and owner.
For example, the effective lives of the assets in a tenant’s fit-out can change based on the business it operates within. The table below shows how this works for just two assets across various industries.
Getting the incentives right
Incentives such as the simplified depreciation rules and temporary full expensing are available to most Australian businesses.
Temporary full expensing has been a popular topic of discussion since its announcement in the last federal budget. At a high-level, temporary full expensing allows businesses to instantly deduct eligible plant and equipment assets purchased after 7:30pm on 6 October 2020 and 1 July 2023.
However, the type of business and whether the asset is second-hand or brand-new affects full expensing eligibility. The table below demonstrates an example of how this can change the outcome.
It’s important to note that the requirement of operating a business is key to this incentive. This means commercial landlords that lease the building without operating a business can’t take advantage of full expensing.
Maximising depreciation for commercial owners
Given that incentives such as temporary full expensing aren’t available to non-business commercial owners, the finer details are what boost their deductions.
The capital works deductions available on the property’s structure and fixed assets is the first and often most significant part of a commercial owner’s depreciation claim.
Plant and equipment deductions are usually also available for the owner. While these deductions are generally found in the tenant’s fit-out, some common plant and equipment assets held by commercial owners include hot water systems, lighting, fire protection equipment and carpet.
BMT’s comprehensive approach
Physical site inspections and applying industry-specific legislation are at the core of the preparation of BMT commercial tax depreciation schedules.
During a site inspection, a specialist BMT site inspector will measure every inch of the property and identify all assets owned by tenant or owner. This key information is used to prepare and accurate, split schedule for all parties involved.
To learn more about BMT’s commercial services and process, contact the team on 1300 728 726 or Request a Commercial Quote.