COMMERCIAL PROPERTY OWNERS and their tenants can both reduce fitout costs for any business by claiming depreciation deductions.
As deductions can be claimed simultaneously by both owners and tenants, a few simple rules must be considered when a Quantity Surveyor prepares a tax depreciation schedule for a commercial property:
Commercial tenants are able to claim depreciation for any fitout they add once their lease starts. At the same time, commercial property owners can claim deductions for any of the plant and equipment items originally found in the property.
If a tenant’s lease demands that the property must be returned to its original condition, the tenant can write-off the remaining depreciable value of removed assets in the financial year of their removal.
If a tenant vacates a building and does not remove the fitout, the owner may still be able to claim the remaining depreciation for these items.
Small business owners should also be aware of the recent changes outlined in the federal budget and understand how these changes will affect their claims.
The following rules apply
- If a business has an aggregated turnover beneath $2 million per year, items added after 7:30pm on budget night (12th of May 2015) worth $20,000 or less will entitle their owner to an immediate write-off in the year of their purchase. This rule will apply until the 30th of June 2017.
- For small business owners, assets which cost $1,000 or less installed between the 1st of January 2015 and the 12th of May can still be written off immediately. Assets above the $1,000 threshold purchased for small businesses between these dates can be added to a low-value pool and depreciated at an increased rate of 15 per cent in the first year and 30 per cent for each year after.
- Assets purchased between the 1st of July 2012 and the 31st of December 2013 for small businesses which cost $6,500 or less are still eligible for an immediate write-off under previous depreciation legislation rules. Most other assets purchased during this time frame can still be pooled at a rate of 30 per cent.
- For businesses with an aggregated turnover of over $2 million, although the measures implemented during the May 2015 federal budget will not apply, there are still substantial deductions available. Items worth $300 or less can still be applied as an immediate write-off and assets which cost $1,000 or less are still eligible to be added to a low-value pool.
Assets not within these thresholds will continue to depreciate based on their individual effective life, as determined?by the ATO.
Bottom Line: Commercial property owners and tenants who would like further information about how any of the recent federal budget rules will affect their depreciation claim can seek expert advice from a specialist Quantity Surveyor such as BMT Tax Depreciation.
BMT also provide depreciation schedules to help outline all of the deductions available for both commercial property owners and their tenants to lodge their claim when completing their annual income tax return.