Allo all, just wondering if anyone here knows about depreciating commercial property?
I had an old house that someone has renovated and converted into a cafe with grease trap, kitchen etc. He’s since sold the business to another cafe operator.
Can i depreciate any of the fittings & fixtures, or can this only be done by the business owner?
Thanx
It depends who owns the chattels. You can’t depreciate something you don’t own and same for the business owner.
All my properties have the chattels separated from the building value and they are depreciated at different rates, hence a bigger tax saving.
If you do own the chattels such as grease trap etc you will more than likely require a valuation on them.
Cheers
JeffThe short answer is that you can depreciate what you paid for. Commercial depreciation is trickier than residential and your question is a bit confusing, but if I put down a few scenarios maybe one will cover your situation. (Bear in mind there are probably endless scenarios.)
1. You buy a property already fitted out as a cafe = you depreciate the fitout.
2. You buy a property and then fit it out = you depreciate the fitout.
3. You sell the property with the fitout = the new owner depreciates the fitout. (Often with commercial properties there are written down values in the sale contract.)
4. You own a property and a tenant fits it out = the tenant depreciates the fitout.
5. The tenant leaves and the fitout stays = the tenant still owns the fitout. He’d be within his rights to take it. (Often removal of a fitout and restoration to pre exsiting condition is part of a lease.)
6. The tenant leaves and owes the landlord $10K. The landlord says forget the 10K, I’ll keep the fitout = the landlord depreciates the fitout. The $10K would be spread across the assets.
7. The tenant goes bust and the owner buys the fitout for $1 = the owner can depreciate that dollar.
They’re a few VERY GENERAL scenarios.
Regards,
Scott
Thanks a lot for the info guys. I will chase it up with the business owner to find out what was sold as part of the business. I’ll probably also give DEPPRO a call and see what they say.
Cheers
You’ll give Deppro a call? Good on you XXX. And to think I spent all that time answering your questions…
There is a company I outsource much of our commercial tax work to (and they in turn send us their residential work). They’re called Apex.
<<edited>>
In the last 6 months, Apex have done commercial schedules for me in WA, SA, Vic, NSW and QLD. They’ve done everything from office buildings to caravan parks.
I believe that commercial depreciation is much trickier than residential. They know a lot about depreciation on commercial buildings <<edited>, but they’re not cheap. I use them because they’re good. Think of them as the QSs used by other QSs.
Depreciation on commercial properties can be huge. We recently had a client who purchased an $8m caravan park sounth of Wollongong. Year 1 depreciation was $392,000.
If you have questions, call Michael at Apex on 02 8243 5790. <<edited>>
Scott – Depreciator 1300 660033
Scott..
Maybe put a hyperlink to your site or post your details a bit more in-depth at the bottom of your posts for those on the forum not sure of your Business [biggrin][biggrin]
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorOkay Redwing.
I’ll bung something at the bottom of the posts – just wary about appearing to advertise.
Thanks for your very informative post depreciator (aka Scott). I will definitely heed your advice and give Apex a call.
Sorry if i was a bit curt with my early reply – i do appreciate your time in responding with great information.
Cheers
Hi Scott,
I might add that most of your posts (you told me off once for recommending Deppro ahead of your firm [biggrin] – and I won’t forget) have been all about information first and foremost.
I, for one, have no problem with a little ‘contact me message’ as a signature – such advertising to be allowable.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
Apex aren’t cheap, XXX. But they’re good. I think using the cheapest QS you can find makes as much sense as using the cheapest accountant you can find. (And I didn’t really take offence.)
When we talk about commercial property, the size and range of property types is huge – yesterday, I was contacted by someone with a big crayfish farm south of Darwin. If it becomes a job, I’ll be sending Apex to Darwin.
If any of you have a shop, or a little factory/warehouse (3 walls, a roller door and a mezanine), any QS who specialises in tax work and is up to date with the rules would be able to handle it. For bigger jobs, you need a specialist.
[email protected] 1300 660033
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