Commercial Assets Deductions

Depreciation is a known concept in accounting but is also one of the major characteristics of direct commercial property investment. Commercial and residential building assets can be depreciated either over 39 years straight-line for commercial property, or 27.5-year straight line for commercial property. Certain land improvements can be depreciated over 15 years, with certain personal property depreciated. The ATO makes allowances for the tenants to be able to claim some depreciation for assets. Commercial tenants are able to claim Gold Coast commercial property depreciation on any fit-out they add from the starting date of their lease. This can include assets such as desks, blinds, shelving, carpet, vinyl, firefighting equipment and security systems. If a commercial tenant removes items at the end of their tenancy and disposes of the item, they may also be able to claim the remaining depreciation for assets removed and scrapped when they vacate the property. If the owner of the asset decides to on-sell items installed or keep them for future use, this does not apply. With low value pooling the ATO is essentially making the task of depreciating multiple, low value items easier. Once you group assets in the low value pool you no longer need to work out their decline in value separately which only one calculation for the pool is necessary.

The ATO specifies ‘low cost assets’ and ‘low value assets’ as eligible for the low value pool:

• Low-cost assets: An asset with an opening value of less than $1,000 in the year of acquisition. Once you choose to create a low-value pool and allocate a low-cost asset to it, you must pool all other low-cost assets you start to hold in that income year and in later income years
• Low-value assets: An asset that has a written down value of less than $1,000 – ie it costs more than $1,000 in the financial year of acquisition, however after the previous year (or years) of depreciation its value falls under $1,000. You can decide whether to allocate low-value assets to the pool on an asset-by asset basis. To make it short, as assets depreciate and qualify, you can add them as required.

There are some specific rules about the operation of low value pools, so it is advisable to seek professional advice to ensure you remain on the right side of the law when it comes to the investment Gold Coast commercial property depreciation offers.

It is clear that furnishing a commercial property will generate much higher commercial property depreciation such as furniture. Some developers include packages with new properties such as white goods and furniture that can result in generous depreciation allowances for investors in the first year. This is certainly a point to consider if you are weighing up various apartment investment opportunities. Moreover, remember that furniture suffers wear and tear, and if you are holding a property for the long term the advantages of depreciation deductions may be far outweighed by the cost of eventually replacing these assets.