03 February

Most commonly overlooked tax deduction for commercial building owners

Building depreciation is one of the most commonly overlooked tax deductions of commercial building owners

The "accounting" that goes with owning a commercial building is typically left to the owners accountant.

Proactive, switched-on accountants will instruct the building owners to purchase a capital allowance and tax depreciation schedule for each commercial building owned, to ensure tax deductions are maximised to full effect.

We have assisted many clients who come to us after working with accountants that have not advised/educated clients in the value or requirements of having a depreciation schedule, or have inadequately accounted for the capital allowance and depreciation themselves.  

As a result, some of these commercial investors have missed out on tens to hundreds of thousands of dollars in legitimate tax deductions every year over a number of years.  In many cases, to say these investors have been unhappy with their accountant would be an understatement.

Example - commercial building owner deductions for depreciation

On a Friday in January, we received a call from Malcolm about his car yard.  Malcolm had discovered that his former accountant had not been claiming capital allowance and depreciation on his car yard.  Malcolm learned during our call that the tax deductions available to him over the full effective life of the buildings and hard-stand was over $7 million.

Malcolm had purchased the luxury car yard in July 2018 (originally built August 2016).  As the property was a commercial property, Malcolm is able to claim both Division 43 (structural/building), and Division 40 (plant and equipment). 

A summary of the tax deductions available to Malcolm are below:

Table of tax depreciation deductions for car yard

 

What types of commercial buildings are eligible for these depreciation deductions?

Tax deductions for the capital allowance and depreciation of commercial buildings are available on all buildings used for income-producing purposes.  Whether your commercial building is used as a:

  • gym;
  • office space;
  • car yard;
  • florist;
  • cafe/restaurant;
  • retail or wholesale shop;
  • hair and beauty salon;
  • child care facility;
  • service station;
  • fast food outlet;
  • tattoo salon;
  • storage;
  • hotel;
  • etc

The owner is entitled to claim depreciation for capital allowance and depreciation of the building and any plant and equipment items they have purchased and supplied.

To ensure the claims for commercial building capital allowance and depreciation are maximised and compliant, engage a specialist quantity surveyor to complete a Capital Allowance and Tax Depreciation Schedule.

A specialist will review and dissect the contract of sale, inspect and assess the building and plant and equipment assets, and complete a schedule for the full effective lives of both Division 43 and Division 40 assets.

If you would like to discuss your commercial premises with us, send an email through to our Senior Tax Depreciation Specialist Alex Konjarski at alexk@capitalclaims.com.au or, call Alex on 1300 922 220.

For more information about commercial building depreciation click here to read our dedicated and detailed explanation. 

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About Mark Wilkins

Mark is an expert quantity surveyor, business owner, public speaker and property developer. With 20+ years experience in the construction and quantity surveying industry Mark’s specialist expertise have been sought in consultant capacity by professional bodies such as the National Institute of Accountants and the National Tax and Accountants Association, and he has presented at various property and tax seminars and expos nationwide. Mark holds a Bachelor of Construction Management from the University of Newcastle, is an affiliate member of the Australian Institute of Quantity Surveyors and a Registered Tax Agent.

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