Commercial property tax deductions for owners
Navigating the world of commercial property investment isn’t always easy. Investors must consider economic factors like population growth and demand to work out if it’s worthwhile investing in a commercial property.
As with residential investment, there are many ongoing expenses involved with owning a commercial property which can sometimes deter investors from making the leap into commercial property investment. It is important to be aware of the deductions available to investors which make holding a property much more affordable. Here are some common commercial property tax deductions available to investors.
Maintenance and management costs
According to legislation governed by the Australian Taxation Office (ATO), commercial property owners can claim deductions for related expenses for the period their properties are rented or available for rent.
Owners can claim an immediate deduction for any expenses relating to the maintenance or management of their property. This may include things like interest on loan repayments, leasing agent fees, council rates, air conditioning repairs, water leaks, cracked tiling or replacing smoke alarms.
Depreciation is a lucrative deduction available to owners of income-producing properties.
As a building and its contained assets age, they depreciate in value. ATO-governed legislation allows owners of investment properties to claim a tax deduction for this wear and tear called depreciation.
Owners can claim under two different categories, capital works or division 43 and plant and equipment or division 40.
Depreciation: capital works
Capital works is the deduction for the building’s structure and any permanently fixed assets. It is commonly referred to as building write-off and can be claimed at either 2.5 per cent over forty years or 4 per cent over twenty five years depending on the property’s construction commencement date. For more information, read BMT Tax Depreciation’s tax depreciation overview.
Commercial properties qualify for capital works deductions if construction started after the 20th of July 1982.
Examples of qualifying capital works assets include roofs, bricks, mortar, wiring, walls, windows, flooring and other permanently fixed assets.
Depreciation: plant and equipment
Owners can also claim for plant and equipment assets they own or those which are left behind by tenants. Plant and equipment refers to assets that can be easily removed from the property and includes items like rangehoods, ovens, carpets and air conditioning.
Plant and equipment depreciation is calculated based on each asset’s individual effective life as determined by the ATO. Effective life and depreciation rates for commercial and residential assets can be found on BMT Tax Depreciation’s Rate Finder tool.
Commercial property owners can claim depreciation for renovations on their properties including those completed by previous owners. This includes things which may not be so obvious, like updated plumbing, water-proofing and wiring.
For renovations of a structural nature to qualify for capital works deductions, they must have commenced within the qualifying dates set by the ATO.
BMT are the commercial depreciation experts
To maximise the depreciation claim for your commercial investment property, it’s important to engage specialist Quantity Surveyors such as BMT for a tax depreciation schedule.
BMT is the largest and most successful tax depreciation company in Australia with extensive experience in creating comprehensive, ATO-compliant schedules.
BMT has prepared tax depreciation schedules for commercial properties ranging from primary production, manufacturing, retail centres, mining, office towers, medical centres, traveller accommodation and many more. Find our more about BMT Tax Depreciation’s extensive experience with our Commercial Capability Statement.
If you’re considering commercial property investment, contact BMT on 1300 728 726. Alternatively, if you need a quote for your existing commercial property, request a quote here.