ARE YOU maximising your Commercial property depreciation deductions this financial year?
Tax time is approaching quickly and you are probably preparing to visit your Accountant to complete your annual income tax assessment.
For many commercial property investors, the claims can appear quite complicated.
There are numerous factors to consider, which can easily lead to incorrect claims being made and deductions not being maximised — particularly when property depreciation is involved.
To assist you during tax time, this two part article series covers 6 tips to maximise the depreciation deductions on your Commercial property.
1. It’s Not Too Late To Depreciate
If your commercial property was built before 1982, it is not too old to claim depreciation. Both new and older commercial properties will attract some depreciation deductions.
It is a myth that older properties do not attract a claim.
Although the Australian Taxation Office (ATO) places restrictions on claiming capital works deductions (depreciation for the structural element of a property for example roofs, walls and floors) — there are no date restrictions for claiming depreciation on plant and equipment assets.
The ATO advises that the owner of any commercial property in which construction commenced after the 20th of July 1982 can claim capital works deductions.
Depreciation deductions for plant and equipment assets are calculated based on the individual effective life for each item set by the ATO. Deductions for plant and equipment are also dependent on each assets condition and quality.
As these items are rarely the same age as the property, generally having been updated over time, there are often significant deductions available to the owner for plant and equipment depreciation claims.
2. Are You Claiming Depreciation on Renovations?
You can claim any renovations completed to an investment property, even if they were completed by a previous owner.
This includes items which may not be obvious. For example new plumbing, water-proofing or updated electrical wiring.
For capital improvements of a structural nature to qualify to be claimed as capital works deductions, the renovation must have commenced within the qualifying dates set by the ATO.
Recently installed plant and equipment items are also likely to receive higher depreciation deductions.
This is due to the higher costs involved in purchasing and installing these assets. As well as the condition the assets are likely to be in when a specialist Quantity Surveyor makes their assessment.
BOTTOM LINE: When it comes to claiming depreciation property investing, you can generally claim more than you realise. Make sure to check out Part 2 of the series, you will find four more tips to help you claim all that you are entitled to.