Depreciation on commercial property?

[capitalist]

Is it possible to claim depreciation on a commercial property that has been rerfurbished by the business owner?
Or are these improvements only allowed by the business owner?

Case:
I buy an old Victorian property that is quite original in condition and being used as an office.
The person on the lease vacates when the lease is up and someone else signs up a new lease but wants to convert it to a cafe. He spends about $70k converting it by opening up the front wall, building a verandah, putting in a commercial kitchen, grease traps etc.

Can i then claim these improvements as depreciable items or is it something that only the business owner can claim?
I can understand that the business owner would claim it, but when he sells the business, i'm sure he includes these costs into the price of the business.
But surely i can also claim something if i have the freehold and it's my property that has these fittings and fixtures in place?
Or would this be double dipping according to the ATO?

Any advice as to what i'm entitled to claim is appreciated as i'm thinking of getting a QS to do a schedule for me...or am i wasting my $?

Thanks,
Mark

 

[mross]

Mark,

this is complicated.

Firstly you need to get a depreciation schedule on the purchase you have made. The age of the original building doesn't matter as you can still claim division 40 allowances based on the revaluation when you purchased the property. The cost for this report will usually be between $500 and $1000.

Then assuming that the tenant has made some alterations to items owned by you......i.e. removed light fittings, changed carpet etc, you will be able to have an immediate deduction for items demolished by you in preparation for the tenancy.

The money spent by the tenant are probably leasehold improvements unless you have some separate arrangement in the lease whereby you retain ownership. It is more likely that the tenant will be able to claim the depreciation and not yourself. Usually the tenant will have to reinstate the building back to pre-lease condition upon vacating the premises. There may be opportunity for you to review the depreciation at that stage.

Hope this helps, if you need any further help private message me.

Michael