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Factory Warehouse Depreciation – How to claim the Maximum

The good news is, that the recent changes to the property depreciation laws do not change the way you can claim Factory Warehouse Depreciation.

The deductions for factory warehouses can sit in the millions of dollars, so owners must take advantage of it and claim as much as possible.

Factory Depreciation Schedules

What is factory warehouse depreciation?

Property depreciation is the loss in value of an asset over time due to wear and tear, physical deterioration and age.

Under Australian property tax law, if you are a commercial property owner and own an industrial property used for income-producing purposes or rented, you are eligible to claim the depreciation of that property against your taxable income.

How can you claim depreciation deductions for industrial properties?

There are two types of depreciation allowances available for industrial properties:

  • Capital Allowances (Construction costs of the building itself, such as concrete and brickwork)
  • Plant and Equipment (Items within the building ranging from electrical gates to hoses, water pumps and security systems)

Depreciation can be claimed for all industrial properties, including warehouses, sheds, factories, and logistics and distribution centres. It also applies to those with other components such as offices and car parking.

What are the rules for claiming depreciation for factory properties?

The Federal Government changed the depreciation rules for residential property in May 2017. While capital allowances remained untouched, depreciation deductions could only be claimed on plant and equipment items on new residential properties.

But the great news is that there has been no change to how depreciation is claimed for a commercial building or other non-residential properties.

That means industrial property owners can continue to claim depreciation for both capital allowances and plant and equipment.

What capital allowance is your warehouse property entitled to as a deduction?

Most industrial properties are classified as ‘non-residential’ properties, and that means capital works deduction (also known as Division 43 allowances) or building allowance can be claimed for those built after July 20, 1982.

The rate of factory depreciation rate is determined by the date it was built:

  • July 20, 1982 – August 21, 1984: 2.5%
  • August 22, 1984 – September 15, 1987: 4%
  • September 16, 1987 – Present: 2.5%

Factory Building Depreciation Rate

What plant and equipment items are depreciable for industrial properties?

Apart from the building, industrial property investors can claim depreciation on a long list of plant and equipment items, including:

Access control systems Hoses and nozzles
Air conditioning Hot water systems
Alarm detectors Intercoms
CCTV Lifts
Door closers Lighting
Electrical gates – controls and motors Pumps
Emergency Warning and Intercommunication Systems Roller shutter electric motors
Extinguishers Security systems
Fire blankets Switchboards
Flooring – ie. carpet Traffic management assets
Furniture Ventilation fans
Gantry cranes Water tanks
Gardening watering systems Window coverings – ie. curtains and blinds
Industrial Property Depreciation Plant and Equipment

Why should you claim depreciation on factory buildings?

It’s so important to maximise your warehouse depreciation deductions as an industrial property owner because it could save you millions of dollars.
Not only is it common sense, but it’s good business sense to maximise your deductions and in turn, profits. Many owners miss out on the savings that can be made through depreciation – don’t be one of the statistics!

Calim Depreciation on Industrial Buildings

How much can I claim in factory warehouse depreciation deductions?

Having a depreciation schedule for an industrial property will enable most owners to claim millions in depreciation – depending on the size, age and value of the asset – over the 40-year lifetime of the building.
As an example, for a warehouse with an office component purchased for >$6 million in 2016, a total of $3.65 million can be claimed in depreciation over 40 years, $910,000 of which is in the first five years

Year

Plant & Equipment

Capital Works

Total Claimable

1 $150,000 $100,000 $250,000
2 $100,000 $100,000 $200,000
3 $70,000 $100,000 $170,000
4 $50,000 $100,000 $150,000
5 $40,000 $100,000 $140,000
6-40 $140,000 $2,600,000 $2,740,000

While this provides a guide of the depreciation that can be claimed for an industrial investment, each commercial property  depreciation schedule is different and many varying factors must be considered when preparing the report. With this in mind, we have launched the Industrial Property Depreciation Calculator to give you an estimate of potential deductions for your property.

What if I only own a small warehouse?

Yes, you can claim depreciation on your warehouse property, no matter what the size.

As a case studie, consider a warehouse bought in Western Sydney for $650,000 in 2016. A total of $393,000 can be claimed in depreciation over 40 years, over $86,000 of which can be claimed in the first 5 years.

In addition, there could be extra deductions available to you. If you, or even the previous owners, have renovated or made additions to the warehouse, these can be claimed as well.

Year

Plant & Equipment

Capital Works

Total Claimable

1 $15,600 $8,300 $23,900
2 $10,300 $8,300 $18,600
3 $7,400 $8,300 $15,700
4 $6,000 $8,300 $14,300
5 $5,300 $8,300 $13,600
6-40 $16,400 $290,500 $293,300
Get a Free Depreciation Quote on your Industrial Property

Can you claim depreciation as a factory tenant?

Yes. Tenants can claim depreciation on the plant and equipment items or assets that they have purchased to carry out their business, including freestanding furniture and traffic management assets.

Washington Brown provides professional depreciation advice and reports for buyers, owners and sellers of industrial properties, as well as tenants.

Do you need to get a professional depreciation schedule?

Yes. A tax depreciation schedule will maximise the tax savings on your industrial investment.

You only need to get it done once, with a Washington Brown  depreciation schedule valid for 40 years (the lifetime of the building). However, we recommend that you do update the report if you do any renovations, repairs or need to replace internal items.

You can provide the report straight to your accountant at tax time.

Tax Depreciation on factory warehouses

How much does a factory warehouse depreciation schedule cost?

The cost of preparing a tax depreciation schedule varies according to numerous factors, including the location and size of your industrial property. Get an individual obligation-free Industrial Property Depreciation Schedule Quote from Washington Brown Quantity Surveyors now.

The fees are 100% tax deductible and we guarantee you’ll save at least twice our fee in the first 12 months, or your there’ll be no charge.

Get a Free Depreciation Quote on your Industrial Property this financial year.

About Tyron Hyde

Tyron Hyde is the CEO of Washington Brown Quantity Surveyors. He is regarded as one of the industry's leading experts in property tax depreciation, is regularly quoted in the media & asked to speak at conferences. Connect with Tyron on LinkedIn Watch Tyron Hyde speak at Washington Browns 40th Party