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You can claim depreciation on on your commercial fit-out in a building. This is separate from claiming depreciation on the building.  

What's a fit-out?

Commercial fit-outs are when you build the interior of a commercial or industrial space so a business can use it.

Commercial fit-outs include:

  • electrical cabling
  • fire protection equipment
  • non-structural interior walls.

They do not include:

  • structural building or waterproofing the building itself
  • anything that makes a space suitable for someone to live, even if it's part of an otherwise commercial building.

You cannot claim depreciation on any residential fit-out, except in some cases when a building is both commercial and residential.

When a building is both commercial and residential

In this situation, some fit-out items will be shared between commercial and residential use. For example, electrical work or a lobby that’s used for both purposes.

How you claim depreciation on these shared items depends on the building’s main use.

If the building is mostly commercial

For example, an office building that also has a residential apartment. You can claim depreciation loss on all the fit-out items except the fit-out inside the apartment.

If the building is mostly residential

For example, an apartment building with retail shops on the bottom floor. You cannot claim depreciation on any of the fit-out items except within the retail shops.

The difference between commercial and residential property

Changing a building's main use

If you change the main purpose of a building from:

  • commercial to residential, you treat shared fit-out items as having been sold at their market value
  • residential to commercial, you treat shared fit-out items as having been bought at their market value.

With items of shared fit-out, you apply the normal depreciation recovery or loss-on-disposal rules.

Treat the change of use as taking place on the first day of the next income year.

Depreciation

Tax Technical advice

Our Tax Technical website has more information about when you can claim depreciation on building fit-outs, as well as an overview of claiming depreciation on buildings.

IS 22/04 Claiming depreciation on buildings
QB 13/01 Depreciation of commercial fit-out


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Last updated: 13 Dec 2023
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