29 May 2019
accountants news

Claiming depreciation for an industrial warehouse

There has been a rise in demand for industrial property in recent years, particularly for warehouse storage space.

This is due to the so-called ‘Amazon effect’ which has resulted in an increase in online retailers requiring the space to store, pack and send orders.

In the year to June 2018, CoreLogic reported 19,835 commercial real estate transactions. Of these, 7,907 (or 39.9 per cent) were for industrial property sales.

The growing demand for industrial property has also been reflected in the number of BMT Tax Depreciation Schedules ordered for warehouses in recent years.

During the 2017-2018 financial year, BMT saw a 21.29 per cent growth in the number of depreciation schedules ordered. A growth rate of more than 20 per cent in the number of schedules ordered for warehouses was also consistent during the
2015-2016 and 2016-2017 financial years.

As industrial warehouse property demand grows, it’s important for owners or tenants to be aware of the depreciation deductions they can claim.

In any commercial property, the owner of the building can claim capital works deductions for the structure and any fixed items. They can also claim depreciation deductions for any of the plant and equipment assets or fit-out they own in the property.

Tenants of commercial warehouses may also be eligible to claim any fit-out they install within the building once their lease has commenced.

Common items that may be installed during a fit-out by a tenant in a commercial warehouse include office furniture, computers and partitioning (for an area where staff oversee the day-to-day operations), forklifts or other bulk-goods handling assets (for transporting goods onto delivery vehicles) and kitchen items such as microwaves and refrigerators (where staff may store and heat up their lunch).

Case study: Industrial warehouse purchased for $1,000,000

Brock owns an industrial warehouse purchased for $1,000,000. The warehouse has a floor area of 1,171m2, three partitioned offices, container high roller door access, bathroom amenities and eight car parking spaces.

Brock earns an annual income of $94,276 from renting his warehouse, or $1,813 per week. Expenses for his warehouse including interest, rates, repairs and maintenance total $123,320.

On hearing about depreciation and the deductions he could claim Brock enlisted BMT to prepare a tax depreciation schedule. From his schedule, he found he could claim $54,630 as a first year deduction for the property.

The table below outlines Brock’s scenario before and after he made his depreciation claim.

By contacting BMT Tax Depreciation and organising a depreciation schedule, Brock improved his cash flow by $389 per week.

If you would like to learn how much you could claim from your industrial warehouse, please contact us.

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