A change in legislation relating to depreciation of commercial properties above $1 million is due to come into force on 1st July 2021.
The ability for owners to claim tax deductions for building depreciation was removed in 2010, so it is great news to see this being reinstated, and it brings us back into line with other OECD countries.
Commercial property owners will once again be able to claim an annual expense that reflects the deterioration of their building(s), fixtures and fittings. It seemed illogical that Treasury once thought that buildings did not depreciate. It’s also positive to see these measures being announced as permanent changes.
We can imagine these improved tax efficiencies will further enhance the appeal of commercial property investment. Especially when you consider the less appealing new residential tax rules, tightened LVR restrictions and the prospect of higher interest rates.
There are things to be aware of at the time of transaction around vendors and buyers allocating the same values to depreciable property – so as always, our message to clients is to seek independent advice from valuation specialists and to understand the tax implications ahead of time.
No doubt 2020 was a bumpy ride, but the buoyancy in the commercial property market is undeniable, and smart changes like this only add to the excitement.
In recent months Viranda has helped clients with more than 15,000sqm of property transacted (from 90-5,090sqm) and meeting buyer requirements from $400k up to $14m.
If you would like to discuss the opportunities in the current market, please reach out we would be delighted to help.