Tax Depreciaiton Deductions for Commerical Building Flooring
What category do commercial floor coverings fall into?
When it comes to tax depreciation schedules, it is important to note that there is a difference between Division 40 items and Division 43 items in the ITAA 1997 tax legislation. Generally speaking, items of Division 40 are depreciable assets – known as Plant and Equipment – and Division 43 items are treated as capital works.
For more information it is recommended to speak to a quantity surveyor in Brisbane who is experienced in depreciation schedules, as they will be able to provide the most accurate advice.
Common Commercial floor coverings
- Vinyl Flooring
- Polished Concrete flooring
- Carpet
- Floating Flooring
- Tiling
Vinyl Floor covering depreciation
Vinyl flooring is a popular and cost effective choice for many business owners. It’s easy to maintain, waterproof, and can come in a variety of styles and colors, making it a great option for any room. Vinyl is also very durable and can last for many years with proper care. However, it can be prone to scratching and denting, and may not be suitable for high-traffic areas.
The Australian Taxation Office allows owners to claim a tax deduction for the cost of installing vinyl flooring as part of their renovation and refit projects. This tax deduction can be claimed over a set period of time, with the tax depreciation schedule taking into account the age and condition of the vinyl. This means that business owners can save money each tax return by taking advantage of the tax deductions offered.
Vinyl Flooring typically depreciates at 20% pa. (When taking advantage of the Diminishing Value method of depreciation).
Polished Concrete Floor depreciation
Polished concrete flooring is becoming increasingly popular in commercial buildings due to its durability, cost-effectiveness, and low maintenance. It is a good choice for industrial warehouses, office buildings, and retail stores. However, there are some benefits and shortcomings to consider when deciding whether to install polished concrete flooring in your commercial building.
One benefit is that polished concrete is a long-lasting and highly durable material. When properly installed and maintained, it can last for decades with little to no maintenance. Additionally, polished concrete is a cost-effective option compared to other flooring materials like floating flooring.
However, when considering polished concrete flooring for a commercial building, there are some drawbacks;
The cost of installation can be quite high due to the specialized labor and materials required.
- Additionally, polished concrete flooring is susceptible to staining and scratching, which can be difficult to remove or repair.
Carpet Flooring Depreciation for Commercial buildings
Carpet flooring can offer a variety of benefits when used in a commercial building. It is comfortable to walk on, easy to maintain, and can help to improve the overall aesthetic of the building. Carpet can also help to reduce noise levels, making it an ideal choice for businesses with many customers and employees. Additionally, carpet is an affordable option when compared to other flooring types.
However, there are also some drawbacks to using carpet in a commercial building.
- Carpet can be more difficult to clean (dirty boots can wreak havoc on a clean floor)
- Carpet can also trap dust and allergens (making it a less ideal choice for businesses with high levels of foot traffic)
- carpets tend to wear out quickly, and can be expensive to replace (and disrupt work efficiency in the day it gets replaced)
When considering the use of carpet in a commercial building, it is important to keep in mind that carpets belong in the Division 40 category of the ITAA 1997 tax legislation.
This means that the cost of carpet can be depreciated over time, and may be eligible for faster tax deductions.
Typically, carpet is depreciated at 25% pa in the Diminishing Value method, or 12.5% pa in the Prime Cost Method. Occasionally, the value of the carpet is less than $1,001 and can be depreciated even faster by taking advantage of the Low Value Pooling method
A professional quantity surveyor or rental property depreciation schedule specialist can guarantee you get the maximum deductions and help to assess the cost of carpet and determine the best tax depreciation rate for the building floor finishes.
Floating Flooring for Commercial buildings
Floating flooring is a beneficial option for commercial buildings for a variety of reasons. It is relatively easy to install, successfully hides a lot of ugly substrates and can be done in a short amount of time. It is also very durable, which helps to reduce the amount of maintenance required. Due to its long-life it’s also a cost-effective option.
However, there are some drawbacks to using floating flooring in a commercial building setting:
- One of the main issues is that it can be difficult to repair if it becomes damaged
- Installing a floating floor requires some time for the glues to set before filling the room with heavy furniture and foot traffic
For those looking to take advantage of the tax benefits associated with floating flooring, the Australian Taxation Office allows for yearly tax deductions through the use of a Tax Depreciation Schedule. In the case of floating flooring, this belongs in the Division 40 category of the ITAA 1997 tax legislation and is claimable at 13.33% pa in the Diminishing Value method.
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In order to ensure that the depreciation benefits are maximised, it is important to seek the advice of a quantity surveyor, particularly if the commercial building is a rental property in the Gold Coast or Sunshine Coast area. A quantity surveyor will be able to provide an accurate assessment of the depreciation claims that can be made for the floating flooring, as well as for other items of property. This will help to ensure that the most beneficial outcome is achieved.
Floor tiling in Commercial Rental Property
Tiling is a popular choice for commercial showrooms and high traffic areas due to its durability and attractive aesthetic. Tiling most commonly used in bathrooms, hallways and kitchens. It is easy to clean and maintain, and can last for many years with regular maintenance.
However, tiling can be expensive to install and maintain. The cost of the tiles, adhesive, sealant and labour can add up. Tiling is also a labour-intensive process and can take a considerable amount of time to install. This can lead to additional lost work hours from staff on the installation days
Fortunately, for property owners, the Australian Taxation Office has recognised tiling as a capital works item and therefore is claimable at 2.5% per annum for 40 years. This means that property owners can claim a tax deduction for the cost of installing tiling in their commercial property.
Overall, tiling is a great option for commercial property owners. It is attractive, durable, easy to clean and maintain, and is claimable as a capital works item for tax purposes. However, it can be expensive to install and maintain, and is a labour-intensive process.
Have any Questions?
Simply get in touch with me here and I’ll personally address any questions you have.
If you found this helpful, you may also find some of my other articles beneficial too. And to see some real life examples of what our clients have been receiving in tax depreciation deductions, check out our Client Portfolio page. But it’s usually best to start at the beginning by visiting our home page
This article was written by William Callaghan A.A.I.Q.S.
2nd generation Quantity Surveyor and founder of WRC Quantity Surveying
