It can be a little hard for any of us to understand the tax depreciation allowances that are available for all the investors of commercial property. We often get confused between the depreciation rules for rental property and then commercial property assets as the difference in depreciation found can vary significantly. So, by becoming more aware and informed about the commercial property depreciation, an investor can choose the best option available to him. So, let us read about all the important tips that are important to get tax benefits that can be claimed on commercial property depreciation:
1. Claim Tax Depreciation and Continue Occupying the Property
There are many investors who buy a commercial property after their name as a company trust and then lease the property back to the business they own. This helps the individual taxpayer to claim the tax depreciation allowance, which is significant with commercial property. This is legal and can be done. You have to go through the investment property depreciation rules for further information.
2. Old Commercial Buildings Certify for the Building Allowance
The building allowances refer to the rapid fall in the value of the commercial property’s work. Work here refers to all the brickwork, concrete, etc. The date of the construction determines what building allowances you can claim.
3. Claimable Items Differs by Industry and Effective Life
You have to be well informed from all sides to get the best benefit out of your property. Every year there is a list of assets that you can or can’t claim by ATO property depreciation. Commercial property owners do not have any list but there are some assets that are claimed at different rates to residential properties. For example, rugs are claimed over eight years in commercial and ten years in residential. There are also certain industry-specific assets that ATO detailed for depreciation claims.
4. Small Tax Breaks to Help Small Business Owners to Increase Cash Flow
In the 2018 federal budget proposed to extend the legislation and after a long time between May and September, the extension of legislation was finally passed by the Senate on the 12th of September 2018.
5. The Bigger the Building the More You Can Claim
The height of the building plays a key role in tax depreciation. The taller the building, the more amount can be claimed for depreciation for the owner of the property. Taller structures attract higher deductions because there are great expenses and greater capital works involved in the overall construction of the building. Multi-storey buildings have other common assets like lifts and fire services which can result in plant and equipment depreciation being available for the owner to claim. Other commercial properties like swimming pools, gyms, etc. can be put for the claim of plant and equipment deductions as this also plays in overall depreciation value for the property investor.
6. Look for an Experienced Quantity Surveyor
The ATO recognizes all quantity surveyors as one of the few professions that have the required construction costing skills to calculate the cost of all the items for the very purpose of depreciation. If the original price of the construction is unknown it is always better to consult with a good quality surveyor for any tax depreciation help to estimate the costs for you.
As there is much difference between a commercial property valuation and a residential one, it is always better to know the proper depreciation value that you can claim later without any problem. As mentioned above, engage with a proper quantity surveyor to give a ready detailed report outlining the claim each year on both the decline in value of the building’s structure as well as income-producing assets.