What is Commercial Depreciation?
Commercial property depreciation refers to the tax deductions an investor is eligible to claim on their commercial investment property.
A commercial investment property could be an office, retail store, industrial warehouse or another non-residential premises.
As the property ages, the ATO recognises that there is wear and tear on the building and its fixtures/fittings. For this reason, they allow the owner to claim a tax deduction that reflects this deterioration.
What Can I Claim?
There are two key components when claiming commercial property depreciation.
The first is known as Building Allowance or Capital Works. Essentially, this is the structure of the building; including concrete, roofing, tiling, windows or built-in cabinets. These works are claimed at 2.5% of their original construction cost.
The second component is Plant & Equipment. This refers to the easily removable or mechanical fixtures; such as carpet, light fittings and air conditioning. These assets are claimed at a faster rate, according to their individual effective lives.
While the laws relating to ‘previously used’ plant & equipment have changed for residential property, commercial property depreciation was left untouched.
