Claiming Commercial Property Deductions

Owners of commercial property can claim promising depreciation deductions each financial year. This decline in value tax deduction is split into two components for the purpose of claiming. Most commercial property investors are unaware that they can claim tax depreciation deductions on their properties and therefore miss out on thousands each year in unclaimed deductions. One of the interesting features with commercial property investing, is that both property owners and commercial tenants are able to claim depreciation deductions for the various assets they own. Commercial building owners investing in real estate are tasked with handling the management, maintenance, taxes, insurance and accounting of the property. Commercial real estate can include land, buildings, and associated land improvements that are either constructed or acquired from an investor or a business entity. Properties can depreciate even if their value is actually appreciating.  Property investment depreciation is a relative concept and has been defined as the fall off in value of an existing property relative to a new property in the same location with a modern specification. commercial property depreciation Gold Coast in both rental and capital values can be arrested by capital improvements and the ultimate cure for depreciation is to redevelop; although major refurbishment can sometimes also create assets that have similar values to new assets. To claim commercial property depreciation Gold Coast and capital works deductions property, investors typically need to enlist a specialist quantity surveyor to complete a comprehensive capital allowances and tax depreciation report or schedule. When completed, a tax depreciation schedule outlines the deductions available for both capital works and plant and equipment items on an income producing property and is used each financial year when preparing tax returns.

Plant and equipment assets (division 40): Includes assets which can be easily removed from the property. The asset’s condition, quality and effective life all determine the allowances available.

Capital works deduction (division 43): Is the deduction for the building’s structure. Available on properties constructed post 1982 (non-residential) and 1987 (residential).

New properties will basically achieve a greater rate and overall amount of depreciation because investors can achieve the maximum Capital Works Allowance, and make the most of low cost pools and immediate deductions for certain assets. Moreover, even properties built prior to 1985 (when the Capital Works Allowance commenced) are worth depreciating. It’s worth checking whether older properties have had renovations or additions as these may attract a Capital Works Allowance. An experienced quantity surveyor may be able to find a range of deductions. Additionally, even if you need to renovate you may be able to claim residual investment property depreciation value in assets such as old blinds, carpets and cook tops as long as the property was built after 1985. This will give you immediate deductions before you even finish the new additions.

When you sell your property, your tax bill will depend on two basic pieces of information, your adjusted cost basis and selling price. The adjusted cost basis will include the original cost of the property, plus various costs, such as capital improvements like upgrades, less the amount by which the property was depreciated. The difference between your adjusted cost basis and your selling price is your profit or loss. It is important to account for depreciation recapture when deciding if you want to sell income-generating real estate. Otherwise, your tax bill will be much higher than you anticipated. Many tend to commercial real estate owners seek out advisory firms to calculate and verify the accumulated depreciation on their commercial asset before deposing of the property.