The Australian Retailers Association (ARA) reported fifteen consecutive months of growth within the retail trade as of November 2022. According to ARA CEO Paul Zahra, “November’s results remain strong when compared to the same period in 2021. The result is particularly strong considering the cost-of-living squeeze being felt by households across the board”.

A slowdown of spending in 2023 is expected as a result of inflation and rising costs of business.  

To prepare for a possible slowdown in retail spending, retailers can improve cash flow by claiming property depreciation. 

Property depreciation for owners and tenants explained

Property depreciation is the natural wear and tear of a building and the assets within it over time. Capital works deductions (Division 43) are claimable on the building’s structure and assets permanently fixed to the property. Plant and equipment depreciation (Division 40) is claimable on the easily removable or mechanical assets. 

Commercial property owners are eligible to claim the capital works deductions they paid for and qualifying plant and equipment assets. Some examples of capital works within a commercial space include car parks, doors, windows, sinks, toilet bowls, cabling and wall panelling. 

As a commercial property owner, you can claim plant and equipment assets if: 

• owned by the property owner and not the tenant
• the tenant vacated the building and left previous assets from a fit-out behind.

Some commonly found plant and equipment assets within a retail store include cash registers, carpet and flooring, signs, partitioning, shelving and clothing racks.  

If a tenant was to re-paint and upgrade the bathroom such as the toilet bowl and sink, they are then eligible to claim those deductions. 

Government incentives

There have been various temporary incentives and policies introduced by the Australian Government to boost economic growth and support businesses throughout the COVID-19 pandemic. 

These incentives include temporary full expensing, increased asset write-off and the backing business investment. Under temporary full expensing eligible businesses can claim an immediate deduction for the business portion of the cost of an asset in the year it is first used or installed ready to use for a taxable purpose. Find more information on the available incentives here. 

Depreciation deduction in a retail store

The following case study reveals the lucrative depreciation deductions found in a Sydney retail store for the owner and tenant. 

Case study 

In 2021 Jack purchased a 500 square metre commercial space in Sydney for $4.5 million which he leases to Sam, Sam uses the space to operate his business ‘Sam’s Sporting Goods’. 

Sam’s Sporting Goods received a substantial increase in sales during November, December and January due to holiday spending and the warm weather encouraging outdoor activities. To prepare for the increase in sales and 2023 retail forecast, Sam’s sporting Goods underwent renovations before Christmas including a new fit-out which he wrote off immediately under temporary full expensing. 

The table below shows the depreciation deductions available for Sam and Jack.  

As we can see there are significant depreciation deductions available for the tenant and owner of a retail space. 

To start claiming depreciation it’s important investors get in touch with a specialist quantity surveyor to organise a tax depreciation schedule.  

For over twenty years, BMT Tax Depreciation has been the most trusted specialist in the industry nationwide. BMT’s specialist site inspectors conduct physical site inspections, ensuring an accurate tax depreciation schedule is completed that maximises deductions and is ATO compliant.

To learn more about the depreciation deductions available in a retail store for owners and tenants contact the experts on 1300 728 726 or Request a Quote. 

Disclaimer: The example used and the information provided in this article is of general use only and should not be used as a quote or advice. BMT recommend consulting an accountant before making financial decisions. Contact BMT for a specialised tax depreciation schedule.