Burgers, fries and tax depreciation benefits drive sale of McDonald’s premises

The McDonald's premises in Preston had the highest number of enquiries of all 21 NSW properties auctioned by Burgess Rawson last month, with attractive tax depreciation allowances a key factor driving investor interest.

The two-year old premises are leased to McDonald’s Australia for 20 years with 18 years still to run.

The premises (pictured below) were advertised as being "built in 2011 with attractive depreciation allowances".

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They featured the latest McDonald's design as well as a drive-thru facility.

Burgess Rawson director Dean Venturato highlighted the fact that the premises were only two years old and that such assets “hardly ever come up”.

He told Property Observer investors would have taken the tax depreciation benefits into account when bidding for the property.

McDonald’s Australia was the winning bidder buying back its own premises and fending off competition from private investors.

It paid $6.45 million for the premises on a 2,621 square metre site reflecting a yield of 5.65% on net income of $365,000 plus GST.

Two other NSW properties that sold as part of the same portfolio auction highlighted their tax depreciation allowances.

A First Choice Liquor outlet in Erina on the Central Coast sold for $4.5 million on a yield of 7.67%. It previously sold for $3.575 million in March 2007.

Leased by First Choice Liquor until 2017 with renewal option to 2037, it features a “modern building with depreciation allowances” on a 2,934 square metre site.

Childcare premises in West Hoxton, leased for 10 years to the Montessori Childcare group with a further 10 year renewal option sold for $1.63 million on a yield of 6.35%.

The free-standing building premises, built in 2008 offered "excellent tax depreciation" allowances were bought by Montessori Childcare.

Under Australian tax law, if you own commercial real estate or commercial property that is rented or used for income-producing purposes you are entitled to claim the depreciation of that property against your taxable income, explains quantity surveyor Washington Brown on its website.

“There are two types of depreciation allowances available: depreciation on Plant and Equipment, and depreciation on Capital Allowances.

“In order to maximise the tax savings on your investment property you'll need a professionally prepared tax depreciation report or tax depreciation schedule, the firm says.

According to Property Observer commercial property writer Chris Lang, tax depreciation claims, can significantly enhance the overall return on your investment.

He says investors should seek professional advice to ensure they are claiming their full entitlement — and thereby, leave nothing on the table.

Lang says another vital step investors to need to consider when they acquire a commercial property is knowing how to correctly structure of the contract of sale in order to maximise your depreciation claim for commercial property.