For many commercial property owners and tenants reducing tax is a key part of their business strategy, yet surprisingly, many investors are missing out on a major tax deduction that could save them thousands. It’s called depreciation and if you’re not maximising depreciation on your commercial property, you could be missing out too.
Over time, your commercial property will experience wear and tear. The Australian Taxation Office allows Quantity Surveyors to calculate a deduction from this wear and tear so you can claim it in your annual tax return.
In a commercial property, both owners and tenants are eligible to claim depreciation deductions simultaneously, so it’s important that both parties contact a specialist Quantity Surveyor to organise a tax depreciation schedule. A depreciation schedule will outline all available deductions over the life of the property.
Under Tax Ruling 97/25, Quantity Surveyors like BMT Tax Depreciation are one of the only professions qualified to estimate construction costs for depreciation purposes.
Depreciation case study: A $820,000 commercial office building
Justin’s company owns a commercial office building purchased for $820,000 and rented for $1,050 per week or $54,600 per annum.
Expenses for the property including interest, rates, property management fees, repairs and maintenance total $57,088.
Without depreciation, Justin’s company is experiencing a loss of $34 per week on the commercial office building.
Justin contacted BMT Tax Depreciation and found his business could claim $40,080 in depreciation deductions for the property in the first financial year alone.
The following table shows Justin’s scenario before and after his company made the depreciation claim for the property. It’s important to note that Justin’s company is not classified as a small or medium sized business and therefore, the 30 per cent tax rate applies.
By claiming depreciation, Justin improved the loss of $34 per week on the company’s property to a return of $198 per week. This improved the tax refund for the property by $12,024 in the first financial year.
Maximise your tax return with property depreciation
As the case study shows, claiming property depreciation deductions can have a significant impact on a commercial business owner’s cash flow position.
Bradley Beer (B. Con. Mgt, AAIQS, MRICS, AVAA) is the Chief Executive Officer of BMT Tax Depreciation.
To learn more about commercial property depreciation, Request a Quote or contact the expert team at BMT on 1300 728 726.