Like many business owners across Australia your business space may never be the same due to the COVID-19 pandemic. Whether you had to buy plant and equipment items for your employees so they could work remotely from home, or your business was deemed “essential” and you had to comply with the social distancing restrictions, as a business owner – you are generally entitled to claim for the plant and equipment items purchased and structural changes made.
Additionally, if during these types of works you were removing assets/structures or decided to make use of the down time and completed a full refurbishment of your property (eg a pub, hair dressing salon or student accommodation), you could also be able to claim tax depreciation for the ‘scrapping’ of the walls you ripped out and for the any new structural part of your renovation plus, claim for the new plant and equipment assets you installed.
If you decided that you no longer need your business space and will now be running your business from home, you may be entitled to claim tax depreciation for any of the following:
- The fit-out at your business space that you have removed due to your lease agreement. You could potentially claim the ‘scrapping’ for the assets that you removed. For many businesses this can be thousands in tax depreciation deductions;
- The portion of Division 43 claims for the structural part of your principle place of residency used for business purposes; and
- The portion of Division 40 plant and equipment assets at your principle place of residency used for business purposes. In some cases, assets up to the value of $150,000 are available for instant asset write-off. You can read further here.
Not only can you claim for tax depreciation, The ATO also allows you to claim for other deductions relating to running your business from home, check out here.
Below we take a look at a client who decided not to renew their business lease and run their business from home, a client who decreased their business work-space and lastly, a client who expanded their business work space during the pandemic:
1 – Closed the office and run the business from home
This small business was renting an office space in CBD and had completed a fit-out work of $52,000.
Their accountant never mentioned depreciation and they didn’t know they could claim for the structural fit out as well as the plant items and equipment that the accountant was immediately writing off for them.
They then got hit with COVID in 2022 and upon government recommendations found ways to have their small team work from home. This opened up a whole new way of business and the office was no longer required so when the lease ended, the decided not to stay on.
They changed accountants at this time and the new accountant recommended that although they had claimed the Division 40 assets immediately – they should also be making the most of every deduction they can including Depreciation of Fixed Office Fit-Out.
Given they had never claimed before, they were able to back claim two years of claims for the structural fit out as well as “scrap” the remaining component that was being disposed of.
By having the Capital Claims Team look at their individual situation, they were able to claim deductions of over $1,000 for each of the last two year’s Division 43 components as well as “scrap” and claim the remaining $38,000 when it was disposed of in the 2021 financial year.
2 – Decreased business space
Five years-ago we completed a tax depreciation schedule for our clients $359,500 commercial office building fit out. The fit-out included furniture, lighting, partitions and a reception area.
The lease of the office covered two levels of the building and they will now be downsizing to one level due to the pandemic and employees now working from home. Their five-year lease period is up for renewal.
Our client was entitled to scrap out the residual remaining amount of the assets that they no longer use ie. partitions, floor coverings, some loose furniture.
We updated our clients tax depreciation schedule to incorporate scrapping and this scraped component resulted in deductions that totalled $85,446 for this financial period.
3 – Increased business space
Due to the pandemic our clients had to create extra space in order for their employees to maintain 1.5 metre social distancing. They completed a renovation on their staff room and board room. Converted a warehouse space into office space, added partitions, additional electrical, lighting and data cabling and hand-sanitisers stations throughout the premises.
With the existing Capital Claims Schedule that our clients had in place, they were able to claim deductions of $19,850 for the 2020-2021 financial year.
An update to the schedule with the additional works and expansion of their space meant they were able to claim an additional $7,218 in tax depreciation deductions for the 2020-2021 financial year and a further $28,362 over the first full five financial years for the expansion of the business space.
4 – Refurbishment Completed
Whilst in lockdown many of our clients decide to make use of their down time and completed a refurbishment at their commercial premises. We take a look at three of our clients different refurbishment scenarios:
Pub refurbishment
Our clients Naz and Kerry completed a refurbishment at their pub. A new outdoor beer garden section redone that extended into some of the carpark.
They ripped out existing small beer garden area fit-out and were entitled to scrap the amount of $29,445.
Plus, with the new works completed and the scrapped amount an additional $45,804 was added to this financial year’s depreciation deductions.
Hair Dressing Salon refurbishment
Our clients Jai and Melissa completed a refurbishment at their Hairdressing Salon. They ripped out old salon and were entitled to scrap the amount of $18,456.
They added new basins, chairs, mirrors, hair colour station and painted throughout.
Jai and Melissa claimed an additional $34,551 to the current year of deductions
Student Accommodation
Nick and Tess converted their rental property from 3 bedrooms to 4 bedrooms.
They added an extra bathroom, updated kitchen, added brand-new laundry assets and painted the exterior and interior of their rental property.
Nick and Tess were entitled to claim an additional $3,955 to the current financial year and substantial deductions for future financial years.
If you would like to speak to Alex Konjarski about your commercial space please get in touch either by contacting him via email at alexk@capitalclaims.com.au or call on 1300 922 220.
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Commercial property depreciation deductions
Tips for small businesses to maximise asset related tax deductions
Most commonly overlooked tax deduction for commercial building owners
