Depreciation deductions are available for commercial property owners and tenants on the wear and tear of the building (Division 43 Capital Works) and its fixtures and fittings (Division 40 Plant & Equipment) over time. Whether strata titled or stand-alone, commercial offices typically attract fantastic deductions based on the high concentration of plant and equipment assets as a component of the total construction cost. Construction costs vary from $1,450 per sqm for basic offices to $2,600 per sqm for high end offices.
Typically, offices will contain the following plant and equipment assets;
- Lighting Systems
- Air Conditioning Systems
- Bathroom Accessories
- Window Blinds
- Fire Detection Systems, Emergency Warning and Indicator Panels
- Security Systems
- Door Control/Entry Systems
- Kitchen Appliances
- Ventilation Fans
Strata titled offices will also offer higher deductions for property owners as claims are available on the building’s common areas and associated plant and equipment items. This may include basements, foyers, levels, bathrooms & external areas.
There are significant deductions available to office tenants who have completed internal fit outs. Most office fit outs have a high percentage of the cost associated with plant and equipment items and in turn see great depreciation deductions. Some office tenants may even operate as a small business entity and be entitled to an immediate write-off incentive and accelerated depreciation rates.
Common Capital works items for office fit outs include;
- Fixed Office Partitioning
- Fixed Cabinetry
- Electrical Modifications
- Bathroom & Plumbing Works
- Ceiling Tiles
- Air Conditioning modifications i.e. duct relocation & vents
Common Plant and equipment items include;
- Workstations & Desks
- Freestanding Partitions
- Office Chairs
- Telephone Systems
- Computer Servers & Network Equipment
- Desktop Computers
- Printers & Photocopying Machines
- Hot Water Installations & ZIP TapsHand Dryers
The total depreciation entitlements for a commercial office owner will consist of two components;
- Division 40 Plant & Equipment Deductions, and;
- Division 43 Capital Allowances.
With the plant and equipment being covered about in brief, the division 43 deductions essentially equate to the structure itself. Our process where the construction cost is not known, is to estimate the total cost to build as at the construction date. For example, the building may have been constructed in 1992. The construction cost of the common areas is also calculated, and a portion based on the strata entitlement of the property is allocated. Whilst there is no cut-off date for depreciation on the plant and equipment items, their value will decline each year until the value has run out. For office buildings, the cut-off date for division 43 claims on the original building structure is 20th July 1982. However, if the property has been renovated or extended, those improvements can still qualify, regardless of the age of the original structure.
Typical deductions depend heavily on both the size, type and age of the office. However, typically we see around 80% of the total construction value being division 43 (building structure claims) and 20% relating to the plant and equipment assets.
MCG have vast experience with office buildings and have completed reports from small strata titled office spaces to multi story office buildings with construction costs in the tens of millions.
A Quantity Surveyor should be able to answer all of your detailed questions and will ensure that no items are missed, the maximum claim is made and that the report complies with the ever changing rules prescribed by the Australian Taxation Office (ATO).
We service Sydney, Newcastle, Parramatta, Melbourne, Brisbane, Adelaide, Perth & Regional Australia.