Many property owners mistakenly believe that with the changes announced in the 2010 budget, specifically the depreciation rate on buildings reducing to zero, that there will be no depreciation deductions available for their property.
While this is true for the "building", depreciation is available on the "fit-out" component of the property as well as "plant & equipment".
In August 2010 the IRD and Treasury published an Issues Paper to address unintentional negative impacts of the budget changes on non-residential properties, and to propose legislation to implement the required law changes. These proposals have since been confirmed by the Revenue Minister in a fact sheet released in December 2010.
The law clarifies that fit-out associated with commercial, industrial, recreational and certain short-term accommodation—motels, hotels, rest homes, some serviced apartments and hospitals, for example—are able to be separately depreciated. The items of fit-out that are separately depreciable are described in the Commissioner’s "Building Fit-out" asset category. This lists over 90 items.
So despite the removal of building depreciation commercial property owners are still able to claim depreciation on building fit-out, which includes but is not limited to items such as:
and much more.
Many commercial property owners have not elected to, or have been advised against, claiming full depreciation entitlements in the past and therefore have no separation of items within the property depreciation schedule.
You now have a decision to make as to how you claim depreciation going forward.
For new purchases a full depreciation apportionment is critical or you will not be able to claim any depreciation.
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