From the 2020-2021 income year onwards we're changing depreciation for commercial and industrial building. Previously, tax depreciation on all buildings was at 0% because of 2011 tax changes.
Now if your business is eligible you'll be able to claim depreciation deductions in your tax return for commercial and industrial buildings. These changes are to help:
- you with your business cash flow in the short-term
- economic recovery long-term by encouraging you to invest in new and existing buildings.
The applicable depreciation rates introduced are 2% DV and 1.5% SL.
Residential buildings are not part of these depreciation changes. This is because they depreciate at a much slower rate.
Depreciation for short-stay accommodation and residential buildings
Whether or not you're able to claim depreciation on property used for short-stay accommodation depends on if it's seen as residential or commercial.
Generally speaking, if there are 4 or more separate units within the same property and they're used for short-stay accommodation (such as AirBnB), they can be depreciated.
Low-value asset threshold for depreciation
The Government has recently passed legislation that temporarily increases the low-value asset threshold for depreciation from $500 to $5,000. This will allow you to deduct the full cost of your business assets with a value of less than $5,000 in the year they purchased them. This is instead of having to spread the cost over the life of the asset.
The low-value threshold will be raised further to allow the immediate expensing of assets purchased on or after 17 March 2020 that cost less than $5,000.
The Government is only raising the threshold for a short time until 16 March 2021. They're doing this so you and other business people keep investing in their businesses throughout the COVID-19 outbreak.
For assets purchased on or after 17 March 2021, this threshold will be permanently increased from $500 to $1,000.