If vacating tenants have left fixtures and fittings in your investment property, some of them may be eligible for depreciation claims.  KY Pih from Napier & Blakeley’s Brisbane office explains the principles.

Property tax depreciation has two parts:

(1)   Division 40 items are plant and equipment like carpets, vinyl, lights, air conditioners, curtains, fire equipment, and hot water units; and

(2)   Division 43 items are generally considered the ‘shell’ of the building and include things like walls, floors, ceilings, pipework, ductwork, etc.

If a tenant vacates and leaves Division 40 items behind, unfortunately the landlord is not entitled to claim depreciation on them because they did not incur the original expenditure.  However, the landlord can continue to use the fitout to generate further income.

A landlord can claim depreciation on Division 43 items left by a vacating tenant even though he or she did not pay for them, because Division 43 items are considered to be ‘part and parcel’ of the building. There’s also the added benefit to the landlord that when inherited Division 43 items are demolished, any remaining depreciation on them can be claimed in full in the year of demolition.

So from a depreciation point of view, the more Division 43 items left in an inherited fitout, the better it is for the landlord.

Napier & Blakeley is an independent property, development and sustainability consultancy.

To find out more about Property Tax Depreciation please contact the people below or visit our website www.napierblakeley.com for our other specialist services.

 

Paul Mazoletti
National Director – QLD
M: 0408 749 202
E: pmazoletti@napierblakeley.com

Peter Osborn
Director – NSW
M: 0439 765 571
E: posborn@napierblakeley.com

John Mathew
Director – VIC
M: 0414 559 326
E: jmathew@napierblakeley.com