UNDERSTANDING TAX DEPRECIATION lingo can sometimes be confusing – but as an investor, it’s important that you have a good understanding of the depreciation deductions you can claim.
This will ensure you’re getting the most out of your investment property.
As outlined by the Australian Taxation Office there are two categories that comprise depreciation deductions – division 43 capital works deductions and division 40 plant and equipment depreciation.
Capital works deductions are income tax deductions an investor can claim for the wear and tear that occurs to the structure of the property and items considered to be permanently fixed to the property. This includes any structural improvements that may have been made during a renovation within the relevant dates.
Common items in commercial properties, where you could capital works deductions include:
- Bricks, mortar, walls, flooring, roofing and wiring
- Sinks, tiles, basins and toilet bowls
- Ducting for air conditioning
As a general rule, any residential building where construction commenced after the 15th of September 1987 will entitle their owner to capital works deductions at a rate of 2.5% per year, for up to forty years.
However, with a commercial building, capital works deductions are available for an even larger time frame. They generally apply to commercial buildings where constructed commenced after the 21st of August 1984.
If your property was constructed prior to these dates, it’s still important to get in touch with a qualified quantity surveyor (such as BMT Tax Depreciation) – because these buildings will have often undergone some form of renovation, which can result in capital works deductions for you as the owner.
Bottom Line: For over 20 years, BMT Tax Depreciation has been the commercial depreciation specialist … and has completed tax depreciation schedules for a wide range of commercial properties including office buildings, manufacturing, shopping centres, medical centres and hospitality venues.