Capitalising on Commercial Tax Depreciation

Australians are eligible to claim tax depreciation through commercial properties along with residential properties. Depreciation can be claimed on commercial properties as a tenant or a property owner. Land-owners get the benefits to claim capital works deductions along with formerly installed equipment and plant. And, tenants can seek deductions of plant and equipment installed in a property or even any other extra renovations. Commercial property investors can heave a sigh of relief as the introduction of legislative changes will not impact them. The legislative changes came into effect on May 9, 2017. However, you can’t claim deduction on second-hand plant and equipment on residential properties if it was rented after 2017.

The following points given below will help you with a tax depreciation report:

1. Impact of the Legislation:

The legislative changes came into effect on May 9, 2019. The legislation will not impact your claims on commercial properties. Commercial properties will remain exempt from it. To avoid all the confusion, ATO has mentioned the changes regarding income tax deductions. Income tax deductions for depreciation in value of formerly used plant and equipment in rental property used for the residential purpose will not be allowed.

2. Landlord of a Commercial Property:

The landlord of a commercial property can seek claim of capital works. He can seek a claim for capital works such as building structure of the property along with any other owned installations. The installations owned by the landlord of a commercial property may include light fittings, blinds, bathroom accessories, and floorings. He will also be eligible to claim strata equipment in case the property has a common area. It will include CCTV cameras, elevators, hand dryers in shared bathrooms, and emergency lights. You can always seek professional help to calculate depreciation on investment property ATO.

3. Tenants of a Commercial Property:

If you happen to be a tenant of a commercial property, you can only claim Division 40. In other words, tenants can claim plant and equipment that they install on the property. In case any renovation takes place by the tenant on the property, it will be eligible for tax deductions. There are a vast number of several industrial items allowed by the ATO for tax depreciation claims. However, the items should only be used for operating the business. The items may include dental items, conveyor belts, commercial cooking equipment, fuel dispensers, etc.

4. Important Examples for More Clarification:

This example will prove useful for you in calculating depreciation on rental property. For instance, David purchased a retail property in the year 2017. And, the retail property was constructed in 2003, which include timber flooring along with a kitchen space with benchtops installed. David then installed blinds worth $500. David then decided to rent the property to John who transformed it into a small restaurant. John installed new cooking equipment and cookware worth $30,000 and also purchased tableware and furniture worth $ 5000. He went for some renovations at $2000. Now, David, as the landlord of the property, can claim for deduction. It will include timber flooring, blinds, strata items, kitchen benchtops, capital works of retail property, and other plant and equipment.

Bottom Line:

If you face confusion in calculating your tax depreciation, you can seek professional help. They will help you furnish the strata property act depreciation report at economical prices. They will also help you secure a tax depreciation schedule for your commercial property. The above points will help you claim tax depreciation through commercial properties. You can also claim tax depreciation on residential houses keeping certain points in mind.

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