Are you making the most of the surprise benefits for commercial real estate thanks to COVID-19?

06 Dec 2020

Commercial real estate is reaping surprise benefits as a result of COVID-19 due to the reintroduction of depreciation on non-residential building structures from April 2020, as part of the Government’s stimulus package.

How does it work?

Re-implemented on a permanent basis after its removal in May 2010, greater tax relief and efficiency has been provided to non-residential building owners this financial year. This allows deductions of 1.5% straight line or 2% in diminishing value on a building’s structure, over and above the higher rates for building fit-out and depreciating assets.

What is the likely outcome?

The change has been welcomed by commercial property owners, who will benefit from the tax change. Syndicators, managers of PIE funds, and direct owners should all be taking advantage of the depreciation allowances to boost cash flow.

Owners of properties purchased before May 2010, who elected to depreciate the building structure when they bought the property, are now able to claim the deductions from April 2020.

The property industry should also take note that, from April 2021, vendors and purchasers will be required to agree the Sale Price Allocation (depreciation) within the contract of sale.

CBRE’s specialist team of quantity surveyors are well placed to prepare fully detailed assessments for all types of commercial property, including disposals and recovery assessments for vendors.

Do three things to prepare

We are currently seeing an increase in requests from landlords and owner-occupiers who are obtaining depreciation schedules for recently acquired or built properties

Three things we have identified that current or potential owners of non-residential buildings can do

  1. Prepare detailed depreciation assessments for your commercial property - including disposals and recovery assessments
  2. Maximise the opportunity by managing depreciation through accurately identifying and assessing depreciable assets throughout the ownership cycle, greatly enhancing your returns
  3. Incorporate new deduction claims available for capital expenditure, including earthquake strengthening.

Why pick a real estate expert for specialist depreciation help?

CBRE uses qualified quantity surveyors with extensive experience in construction techniques for this type of work. The team can accurately allocate all assets, both visible and concealed, to the correct categories.

Through the expertise in construction costs, we can ensure that allowances are fully, but accurately, claimed and our methodology is continually reviewed, delivering confidence to our clients.