Depreciation, putting $ back in your pocket
Right now, all businesses in New Zealand are feeling the effects of COVID-19, and commercial property owners have their own set of questions to ask. But there is some positivity on the horizon.
In a nutshell, the government recently announced several business support packages to negate the impact of the pandemic on our economy, including reinstating depreciation on commercial and industrial buildings for the 2020/2021 tax year. Aimed at bolstering reinvestment into commercial property and stimulating productivity, this is welcome news as we head towards the recovery phase of COVID-19.
While the immediate effects for property owners will not be felt until the next tax year ends, the opportunity should not be missed. An assessment on how it can positively impact your cashflow will be encouraged. As part of our duty of care, Viranda will actively guide our clients in the process of appointing a depreciation specialist, organising inspections and liaising with accountants on your behalf.
This area is a subject of confusion for property owners who mistakenly believe there are depreciation deductions available for commercial property. While it is true that since 2011, depreciation for commercial landlords was only available on landlords fit-out, fixtures and fittings, which comprised a much higher depreciation percentage, but provided minimal overall tax subsidy.
The new policy being introduced will see the application of either a 2% straight line or 3% diminishing value depreciation rate be applied to commercial buildings with an estimated lifetime of 50 years. This could see commercial owners achieve tax savings of up to 50% for the next tax year.
Viranda respects this move by government to nudge recovery across all business sectors in a positive manner. This unexpected policy change will inspire property owners to use the windfall strategically, including reinvestment and activity within the commercial landscape.
Put frankly, this move will allow about $2.1 billion that would normally be collected in tax, to remain with commercial property owners.
Let’s review your situation get the savings back in your pocket wherever possible.