Commercial Property Tax Depreciation
Depreciation Schedules = Tax Deductions
When you own a commercial investment property, the rent you receive is taxable income.
Because that income is taxable, the Australian Taxation Office allows eligible deductions for the cost of constructing the building and installing the assets within it. Those deductions are claimed over time through depreciation.
A Commercial Property Tax Depreciation Schedule identifies those eligible deductions and calculates what can be claimed each year.
For many commercial properties, particularly newer, refurbished or extensively fitted-out properties, the deductions can be substantial.
What Can Be Claimed in a Commercial Property?
Commercial properties are made up of multiple components that may qualify for depreciation.
These generally fall into the following areas:
Capital Works – The Building
Eligible construction expenditure relating to the building itself such as concrete, steel, roofing, walls and other fixed structural components, may generally be claimed over time as Capital Works Deductions.
Plant and Equipment
Assets within the property such as air conditioning systems, lifts, lighting, security systems, mechanical services and other installed items may also be claimable.
Fit-Out and Improvements
Offices, medical suites, retail tenancies and hospitality venues often contain significant fit-outs. Refurbishments and improvements can also create additional deductions.
Each property is different. A depreciation schedule identifies what applies to that specific asset and calculates the deductions available.
Why Depreciation Matters in Commercial Property
Depreciation directly affects an investor’s after-tax return.
For Agents and advisors, this can be important when:
Preparing an Information Memorandum
Marketing an investment asset
Discussing yield and net return
Supporting a purchaser’s due diligence
Advising owners before refurbishment
Despite this, depreciation is rarely highlighted in commercial property listings, even though it can represent a significant Tax Deduction for the purchaser.
Understanding the potential Depreciation available can help present a clearer and more complete investment picture.
For commercial property Owners, a properly prepared Depreciation Schedule can:
Reduce taxable income through eligible deductions
Improve after-tax cash flow
Identify deductions from previous construction or refurbishment works
Distinguish between eligible building and plant and equipment deductions
Account for owner contributions, fit-outs and improvements
Commercial properties can involve multiple stages of construction, refurbishment and fit-out. A detailed schedule helps identify eligible expenditure and gives the owner and their accountant a clear record of the deductions available.
Why Use a Quantity Surveyor for Commercial Property Depreciation?
Commercial property Depreciation requires an understanding of construction costs, building components and Tax Depreciation rules.
A Quantity Surveyor specialises in construction costing. When preparing a Commercial Property Tax Depreciation Schedule, we:
Assess the property and its components
Establish relevant construction and improvement costs where required
Break costs down between the building, fit-outs and individual assets
Apply the appropriate Depreciation treatment to eligible components
Calculate the Deductions available each year
This process requires a detailed understanding of building construction, materials, commercial fit-outs and historical construction costs.
R24 prepares detailed, ATO-compliant Depreciation Schedules for commercial properties across Australia. Our role is to identify eligible Depreciation and calculate it correctly, providing a comprehensive schedule for you and your Accountant.
Help prospective buyers understand the potential Tax Benefits of a commercial property.
R24 provides complimentary Depreciation Estimates for commercial properties being marketed for sale.
The estimate gives prospective purchasers an indication of the depreciation deductions that may be available if they purchase the property, providing useful additional information when assessing the investment.
For commercial agents, it can be included in the Information Memorandum, sales campaign or provided directly to interested purchasers.
Our complimentary estimate includes:
An estimate of potential depreciation deductions
An indication of the deductions that may be available in the early years of ownership
Clear information suitable for inclusion in sales material
No obligation for the purchaser to proceed with a full Depreciation Schedule
REQUEST A FREE DEPRECIATION ESTIMATE
The estimate is indicative only. A full Commercial Property Tax Depreciation Schedule is required to claim the Deductions available to the purchaser.
Free Depreciation Estimates for Commercial Listings
Ready to Maximise Your Commercial Property Depreciation?
Whether you’ve recently purchased a commercial property, completed a refurbishment or need an up-to-date Depreciation Schedule, R24 can identify the eligible deductions available and prepare a comprehensive schedule for you and your accountant.
Selling a commercial property?
Request a Free Depreciation Estimate for your sales campaign.