What depreciation commercial property investors can claim

In simple terms, your depreciation falls under two separate (but related) categories:

• Plant and equipment items (Division 40)
• Capital works allowance (Division 43)

And not everyone is in a position to acquire a stand-alone property.

More often than not, you'll be looking to purchase a "strata-title" office or warehouse, involving an owners’ corporation and some common-area property.

As such, you may not be aware of the full extent of what you are entitled to, by way of your depreciation claims.

However, once you are aware of them, you can significantly enhance the overall return on your investment.

Plant and equipment items

Apart from what may be included inside your unit, you are able to claim your pro-rata share of the common-area items as well. This includes things like the lifts, lighting, fire protection, security system, air-conditioning, gym equipment (including any pool and spa equipment) and so on.

Capital works allowance

Again, quite apart from the structural components of your own unit, you are entitled to also claim your share of the common-area capital items as well.

These will include the driveways, car park areas, foyers, stairwells, barbecue areas, common area communities (like the gym, etc) and fixed landscaping.

Depending upon the year of construction, this allowance would be spread over either 25 or 40 years.

In any event, the proportion of your claim is based upon your "unit entitlement" as specified on the strata plan itself.

Your first step is to engage a land surveyor to thoroughly inspect the common area items. From there, a detailed schedule of your entitlements is drawn up for your accountant to prepare the year-end claim for your depreciation.

Bottom line: Clearly, you need to seek professional advice to ensure you are claiming your full entitlement — and thereby, leaving nothing on the table.

However, there is still one vital step you need to take at the time you acquire each new property. And this relates to knowing how to correctly structure of the contract of sale in order to maximise your depreciation claim for commercial property.

But that's a discussion for another day.

Chris Lang is an advisor to commercial property investors and gives keynote speeches and regular seminars on the best way to invest in commercial property. He maintains a blog, his-best.biz, which he updates regularly about the best way to get the most out of your commercial property investment.