Only 20% of Commercial Property Owners are claiming their full entitlement to depreciation in their tax returns.
You could be missing out on thousands of dollars in tax deductions each year.
Property investors are in the business of making money, and as with every business, the Australian Taxation Office allows you to claim depreciation as a tax deduction.
Depreciation is the accounting method used for calculating the loss in value of a building and it fixtures & fittings as the property gets older. With a Tax Depreciation Schedule, you can claim that loss on rental properties as a deduction in your tax return every year until the cost of the asset is fully written off.
The vast majority of Commercial Property Owners are not aware of the tax advantages that claiming depreciation brings, and how it can improve their overall Return on Investment. If you have owned the property for several years, a Tax Depreciation Schedule may even be retroactively applied, possibly allowing your accountant to amend up to two previous tax returns, resulting in an immediate rebate from the ATO.
Tax Depreciation is not just limited to the construction cost of a building, it also includes Plant & Equipment such as:
Fire Services
Car Parks
Machinery
Common Areas
Office Fit-Outs
Kitchenettes
Understanding the benefits of Tax Depreciation can increase your Return on Investment.
Below are some examples of typical deductions we’ve found for our clients:
| Property Type | Commercial Unit | Office/Warehouse | Office & Fitout | Industrial Warehouse |
| Property Description | Warehouse (tilt-up with mezzanine) | Office (two floors) and Warehouse | Professional Services Office | Office (two levels) and Three Warehouses |
| Size (m²) | 214m² | 541m² | 165m² | 2,744m² |
| Year Constructed | 2016 | 2007 | 2004 | 1987, 1988, 1995, 2004 |
| Deductions (first year) |
$7,147 | $19,118 | $20,061 | $36,165 |
| Refund* | $2,144 | $5,735 | $6,018 | $10,849 |
*Based on a business tax rate of 30%
Case Study
The Property
A 5,500m² industrial complex, built 2001, ~35km from Perth CBD
The Situation
A financial advisory practice needed to complete end-of-year financials for their commercial client. A Tax Depreciation Schedule was required to improve the tax outcome on the client’s financial result.
Where we helped
Asset Reports was engaged directly by the financial advisory practice to inspect their client’s property, and prepare a Tax Depreciation Schedule. Asset Reports was advised that the property was a commercial building, which attracts depreciation rates of 2.5% p.a. (over 40 years).
The Real Kicker
In performing our usual, rigorous research on each property, Asset Reports discovered eight successive building applications lodged with the local authority, indicating incremental expansion on the building. This enabled higher cumulative tax benefits for the owner, than if the finished facility was simply assumed to be a single-stage constructed building.
Furthermore, the building was in fact a manufacturing facility, rather than a commercial property. The significance of this distinction is that a manufacturing facility is entitled to a 4% depreciation rate (over 25 years) than a commercial property (2.5%, 40 years). If we had taken the property at face-value, the first year deductions would have been substantially less.
By our detailed investigations of council records, and comprehensive working knowledge of the ATO requirements, we enabled a much better result for our client’s client. And importantly for our client, they were recognised by their client for engaging subject matter experts, genuinely interested in optimising the outcome for the property owner.
Finally, we attended the site within 48 hours of the booking, and delivered the completed report within 7 days – some 12 weeks sooner than our competitor offered the advisory firm. This enabled the advisory firm to immediately complete their engagement, and finalise their report for their client.
