Claiming depreciation is paramount for commercial property owners yet research suggests around 80 per cent of owners fail to maximise the deductions available and therefore miss out on thousands of dollars.
A depreciation claim can help owners of commercial properties who are experiencing a negative cash flow to turn this into a positive cash flow asset.
It is recommended to speak with a specialist Quantity Surveyor to obtain a comprehensive depreciation schedule for any income producing property.
This schedule will outline all of the deductions an investor can claim for wear and tear which occurs over time to the structure of the building and the plant and equipment assets contained within it.
The following example shows how the owner of a commercial office building identified an additional yearly cash flow of $12,024 simply by claiming depreciation.
In the scenario, the investor purchased the building for $820,000 and rented the property for $1,050 per week or $54,600 per annum.
Expenses for the property including interest, rates, property management fees, repairs and maintenance totalled $57,088. Without depreciation, the investor is experiencing a loss of $34 per week.
The owner contacted BMT Tax Depreciation who found they could claim $40,080 in depreciation deductions in the first financial year alone.
The following table shows the owners situation after tax, with and without a depreciation claim.
By claiming depreciation, the property owner improved their loss of $34 per week to a return of $198 per week.
This improved their tax refund by $12,024 in the first financial year.