As a commercial tenant you are probably aware that you can claim a deduction for interest on your loan, insurance, cleaning, security service, repairs and maintenance. Unfortunately, a commonly missed commercial tenant deduction, is the commercial property depreciation deduction.

When a commercial tenant leases out a commercial property, most of the time they will complete a fit-out to suit their businesses operations. A commercial space may be converted into a hairdressing salon, an office, a mechanics work-shop, a dental surgery or a restaurant. And within each of these commercial fit-outs, they each have different plant and equipment assets installed.

For example, a restaurant fit-out could have plant and equipment assets such as ovens, range hoods, chairs, tables, coffee machine, fridges, freezers, air-conditioning, crockery, cutlery, glasses, security system, lighting. There could also be structural layout changes to allow for the kitchen to be fully operational and separate from the diners. For example, walls added, new ceiling, carpet ripped out and new hardwood flooring installed.

Commercial tenants are eligible to claim capital allowance and depreciation for any plant and equipment assets paid for and installed (Division 40) as well as for structural additions or improvements that they made to a building (Division 43). This can total thousands and in some cases hundreds of thousands in tax depreciation deductions.

Why do commercial tenants miss out on claiming the commercial tax depreciation deduction?

When talking to many of our clients, it’s often a case of – they “just didn’t know that they were entitled to claim it”. Both commercial landlords and commercial tenants have the opportunity to increase cash flow and return on investment by claiming substantial commercial property depreciation deductions for the capital works and depreciation of their building, fit-out and business assets. 

Case Study

Our clients Max and Juliette converted an industrial warehouse back in 2017 into a cross-fit gym. Plant and equipment items within the gym were: ice bath, wading pool, sauna, flooring, walls, boxing ring, mirrors, weights and weight bars, exercise equipment – bikes, rowing machines. They found out about claiming the tax depreciation deduction in August 2020. Lucky for them they are also entitled to back-claim for those previous years deductions. Here are their commercial property depreciation results:

tax depreciaiton claimable for commercial tenant

“Max and I worked in different fields before we started our cross-fit business back in 2017. And to be honest we learnt about running a business as we went along. Our accountant at the time, how can I say it, wasn’t very good, and didn’t mention commercial property depreciation. We changed accountants this year and they told us to get in touch with Capital Claims Tax Depreciation.  

We spoke with Alex where he informed us that we could claim a tax deduction for our plant and equipment assets and for any improvements we made to the commercial space we were renting. When we received our tax depreciation schedule, I cried happy tears as the commercial depreciation deductions we were entitled to claim and also back-claim, helped out our cash-flow tremendously.

Honestly I would highly recommend to anyone who is leasing out a commercial space to have one done.” Juliette Harris.

 

How do I claim for my commercial property depreciation?

Generally, to maximise these deductions, you will need to organise a Capital Allowance and Tax Depreciation Schedule. The preparation of a Commercial Schedule is typically far more complex than a depreciation schedule for a residential property.  Our experienced team will conduct a thorough site assessment and review the contract of sale, inventories and lease arrangements to ensure maximum results and compliance.  

If you would like to discuss your commercial property give Alex Konjarski our Senior Tax Depreciation Specialist a call on 1300 922 220. Or you can email Alex at alexk@capitalclaims.com.au.

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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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