As a commercial tenant, when you first sign a lease, you will often need to spend a substantial amount of money installing assets and fitting out the new space before you can open the doors for business.
You might need to install a security system to keep the items you 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.
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.
Depreciation can be claimed in two ways; as a capital works deduction for the decline of the building structure, and as deduction for the depreciation of all plant and equipment items contained within the property.
Common business assets installed during a fit-out that tenants can usually claim include:
- Lights and light fittings
- Flooring such as carpets or tiles
- Air-conditioning units,
- Firefighting equipment
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, a tax depreciation schedule can help show the value of the items being scrapped. Tenants are then able to write-off these items as an immediate tax deduction in the year the asset is removed for any remaining depreciable value.