Common Commercial Property Tax Mistakes You Need To Avoid

To ensure you get the highest return from your property this EOFY, here the most common mistakes made by commercial investors.

Building Depreciation

Deductions for commercial property depreciation are dependent on when the building was constructed. Original construction costs can’t be claimed on a property built before September 16, 1987. Commercial properties built after this date can claim depreciation at a rate of 2.5% a year for a maximum of 40 years.

Travel Costs

While travelling expenses to residential properties haven’t been acceptable tax deductions since July 1, 2017, you should know these travel costs can still be claimed for commercial investments.

Repairs Vs Improvements

It’s important to understand what the ATO considers to be a tax-deductible repair and a non-deductible improvement. Returning something to its original state which retains its value is a repair, which attracts an immediate deduction of all expenses. Alternatively, when something is enhanced or upgraded beyond the original purchase condition it’s an improvement, which is capital that gets depreciated over time.

Strata Fees

You’re allowed to claim body corporate fees for any commercial properties on strata title. Just remember that maintenance and garden expenses are included, which means they can’t be deducted separately later.

Capital Gains

When a commercial property is sold, Capital Gain Tax is deferred to the exchange date rather than being on the date of settlement. That means waiting until July 1 to exchange pushes the tax payment into the next financial year.

Avoid Paying GST

It’s also handy to know that selling or purchasing a commercial property that’s fully tenanted means you can effectively avoid paying the GST.

Capital Works

Owners of commercial properties can deduct certain capital works expenses for ongoing construction. However, to avoid double-dipping when selling the property, the cost base must be reduced by the number of deductions claimed throughout the ownership period.


*Disclaimer: This article is for general information only and should not be relied on as advice. You should consider your personal situation and seek advice that is specific to your circumstances before making any decisions based on this information.  If there are any issues you would like us to discuss with us arising from this article, please contact us*

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