Most commercial property owners are sitting on thousands of dollars in unclaimed tax deductions, simply because they've never had a professionally prepared depreciation schedule. The sooner you act, the sooner you start claiming what you're entitled to.
At Acumentis, our qualified quantity surveyors identify every eligible deduction across your building and its assets, so you claim what you're entitled to and nothing gets missed. Whether you're a long-term owner, a commercial investor, or new to leasing commercial property, a tailored depreciation schedule could significantly improve your return this financial year.
Acumentis quantity surveyors prepare tax depreciation schedules in accordance with Australian Taxation Office (ATO) requirements. Where original construction costs are unavailable, the ATO accepts estimates prepared by a suitably qualified quantity surveyor.
What Is Depreciation on Commercial Property?
Tax depreciation allows property owners to claim deductions for the decline in value of their building and its assets over time. For commercial properties, this typically includes:
- Capital Works (Division 43): Structural building elements and eligible capital works including foundations, walls, roofs, stairwells, fixed partitions and certain structural improvements.
- Plant and equipment (Division 40): Depreciating assets such as air conditioning, lighting, office furniture, mechanical services, electrical assets, lifts, security systems, office equipment and other depreciating assets.
These deductions can significantly reduce taxable income, improve cash flow, and enhance the overall return on investment.
Why a Commercial Property Depreciation Schedule Matters
Many commercial property owners miss out on substantial deductions simply because they haven’t had a depreciation schedule prepared. A professionally prepared report identifies all eligible assets and applies the correct depreciation rates, ensuring compliance with ATO guidelines. Even older buildings or previously owned properties can benefit.
Missed deductions may be recoverable through amended tax returns where eligible. The applicable amendment period depends on the taxpayer’s circumstances and should be confirmed with a registered tax agent. Where original construction records are unavailable, a qualified quantity surveyor from Acumentis can estimate eligible construction costs for capital works purposes, helping property owners determine potential depreciation deductions even without original build invoices. The goal is always the same: identify and document every eligible deduction before tax time.
Who Can Claim Commercial Property Depreciation?
Depreciation is generally available where commercial property is used to produce assessable income. This includes investors who purchase an investment property to generate rental income, and commercial owners leasing commercial property to tenants. Both can generally claim depreciation deductions on the building and its assets, provided the property is used for income-producing purposes.
Commercial tenants may also be entitled to claim commercial property depreciation on fit-out and equipment assets they've installed themselves, provided those items are used for income-producing commercial property purposes. This is worth reviewing when a commercial tenant vacates a property, as eligible fit-out assets may require appropriate depreciation treatment depending on ownership, disposal and lease arrangements. Owners and tenants should each maintain their own schedule to avoid double-claiming the same assets.
EOFY Timing: When Depreciation Commercial Property Owners Should Review
Regardless of whether the EOFY has just passed or is fast approaching, whatever point you're at in the financial year, now is a good time to:
- Review your property portfolio
- Identify eligible assets
- Engage a qualified quantity surveyor to prepare or update your depreciation schedule
Understanding Division 43: The 4% Depreciation Rate
Most commercial buildings constructed after the relevant qualifying dates may be eligible for Division 43 capital works deductions at either 2.5% or 4%, depending on the nature of the building, construction commencement date and legislative requirements.
The 4% capital works deduction allows eligible buildings to be written off over 25 years rather than 40 years, providing an accelerated deduction for qualifying property owners.
Examples of properties that may qualify for the 4% rate include:
- Eligible build-to-rent developments: Certain new build-to-rent projects may qualify for the 4% capital works deduction where they meet the relevant legislative requirements.
- Certain short-term traveller accommodation: Some buildings used to provide short-term accommodation for travellers, such as qualifying hotels, motels and similar accommodation premises, may be eligible for the 4% rate where the required conditions are satisfied.
Not all commercial properties automatically qualify for the higher rate. Eligibility depends on factors including the property's use, construction date and whether it meets the specific requirements under Division 43.
Capital improvements made after the original construction, such as extensions, structural upgrades or major renovations, may also qualify for separate capital works deductions. These deductions should be assessed independently as part of a comprehensive depreciation schedule.
Not sure if your build-to-rent development or accommodation property meets the criteria? Our quantity surveyors can confirm your eligibility and prepare your schedule accordingly.
Depreciation Methods: Diminishing Value vs Prime Cost
Eligible depreciating assets, such as air conditioning units, carpet and office fittings, may generally be depreciated using one of two ATO-approved methods: the diminishing value method or the prime cost method. The diminishing value method calculates a higher yearly depreciation calculation in the earlier years of an asset's effective life, tapering off over time.
The prime cost method spreads the deduction evenly across the asset's effective life instead. The appropriate depreciation method depends on the asset, ownership circumstances and applicable tax rules. The selection of an appropriate depreciation method should be discussed with a registered tax adviser. Acumentis provides the depreciation schedule and cost assessment used to support the claim. Choosing the right depreciation methods for your depreciating assets, and applying the depreciation rules correctly, can make a meaningful difference to the available depreciation deductions each year.
Commercial vs Residential Property Depreciation
Depreciation rules differ slightly depending on commercial property types. Retail property, industrial premises, and office buildings are all assessed individually, as construction costs and asset mix vary widely between them. It's a common question from residential investors buying their first income-producing asset: does residential property depreciation work the same way?
In broad terms, yes. Residential investors may claim eligible capital works deductions and depreciation deductions for qualifying assets; however, restrictions apply to certain second-hand residential property plant and equipment assets acquired after 9 May 2017 by individual investors. If you own both commercial and residential holdings, it's worth having each depreciation schedule reviewed separately by your accountant or registered tax adviser, since real estate agents typically aren't qualified to advise on depreciation rules.
Own both commercial and residential property? Each asset needs its own schedule, prepared the right way. We work across both, so nothing falls through the cracks.
Instant Asset Write-Off and Depreciation of Commercial Property
The instant asset write-off has undergone significant changes over the past five years, with particularly dramatic shifts during the COVID-19 stimulus period. The instant asset write-off applies to certain eligible depreciating business assets, not the building structure itself. Eligibility and thresholds depend on the relevant income year, business turnover and when the asset was first used or installed ready for use.
If your business acquired eligible assets during previous periods, it may be worth reviewing whether deductions were correctly claimed based on the rules applying at that time. Understanding the historical changes can help you identify missed opportunities and ensure you're making the most of available tax benefits.
| FY | THRESHOLD | ELIGIBILITY CRITERIA | NOTES |
| 26-27 | $1,000 (Default) / $20,000 (Proposed)* | Small businesses with turnover < $10M | Threshold reverted to statutory baseline; applies to assets first used/installed from 1 July 2026. |
| 25-26 | $20,000 | Small businesses with turnover < $10M | Extended via legislation; applies to assets first used/installed between 1 July 2025 and 30 June 2026. |
| 24-25 | $20,000 | Small businesses with turnover < $10M | Applies to assets first used or installed ready for use between 1 July 2024 and 30 June 2025. |
| 23-24 | $20,000 | Small businesses with turnover < $10M | Applies to assets first used or installed ready for use between 1 July 2023 and 30 June 2024. |
| 22-23 | Temporary full expensing | All businesses with turnover < $5B | No upper threshold limit; full cost of eligible assets could be immediately deducted. |
| 21-22 | Temporary full expensing | All businesses with turnover < $5B | Continuation of the COVID-19 stimulus measure framework. |
| 20-21 | $150,000 | Businesses with turnover < $500M | Applies to assets first used between 12 Mar 2020 and 30 June 2021 (if purchased by 31 Dec 2020). |
*Instant asset write-off thresholds are subject to legislative change. Property owners should confirm current eligibility requirements with the ATO or their tax adviser.
Eligibility for Commercial Property Tax Depreciation
Eligibility for depreciation depends on several factors:
Ownership: You must own the property or hold a leasehold interest.
Income Use: The property must be used to generate income, through rent or business operations.
Construction Date: Construction dates affect whether capital works deductions are available and the applicable rate. Many eligible buildings constructed from 16 September 1987 may qualify for capital works deductions at 2.5%, subject to the property's use, construction details and applicable legislation.
Asset Types: Properties with fit-outs, machinery, or equipment often have more claimable items.
Even older buildings may qualify if renovations or upgrades have been made. If you meet these criteria, a tax depreciation deduction can typically be claimed each year for the life of the schedule, whether you're a long-term owner, a commercial investor, or newer to leasing commercial property.
Depreciation, Tax Savings and Capital Gains Tax
Depreciation deductions genuinely reduce your taxable income each year, but it's worth understanding how this interacts with capital gains tax down the track. Capital works deductions claimed over the years you own a commercial property generally reduce the property's cost base, which can affect the capital gain calculated when you eventually sell.
This doesn't mean depreciation isn't worth claiming. The potential future CGT implications should be considered alongside the immediate tax benefits of claiming eligible depreciation deductions. However, it's a conversation worth having with your accountant as part of your broader tax strategy.
If you believe you've missed depreciation benefits in previous years, the ATO generally allows eligible taxpayers to amend prior tax returns within applicable amendment periods. The timeframe depends on the taxpayer and circumstances, so it's worth reviewing older schedules rather than assuming the opportunity has passed.
Your Checklist: Depreciation Schedule for Commercial Property
- Have you ordered a depreciation schedule for your commercial property?
- Are you claiming all eligible capital works and plant & equipment?
- Have you reviewed recent tax changes that may affect your claims?
- Are you working with a qualified professional to ensure accuracy?
Why Use a Quantity Surveyor?
The ATO recognises that a suitably qualified quantity surveyor can estimate construction expenditure where original construction records are unavailable. A professionally prepared tax depreciation schedule documents eligible Division 40 and Division 43 deductions and provides the supporting cost information relied upon by accountants when preparing income tax returns. Acumentis quantity surveyors apply construction cost knowledge, site inspection findings and industry cost data to assess eligible depreciation claims.
Get Expert Help
Tax depreciation is a powerful tool, but only when used correctly. At Acumentis, our team of qualified valuers and quantity surveyor partners can help you identify eligible depreciation deductions supported by a professionally prepared tax depreciation schedule and help identify eligible capital works and depreciating assets in accordance with applicable ATO legislation.
Contact us today to arrange a depreciation assessment and make the most of your EOFY strategy.
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