Starting from the 2024-25 financial year, the tax depreciation rate for commercial and industrial buildings will revert to 0%. However tax deductions for depreciation on commercial fit-outs will still be applicable.
Since 2010, there have been changes to the ability to claim depreciation deductions for long-lived buildings. In 2010, the ability to claim depreciation for all long-lived buildings (with a useful life of more than 50 years) was removed, with depreciation being reintroduced in 2020 for non-residential buildings as a COVID tax relief measure at that time. From 1 April 2024 and now the deductions will be removed again, setting the depreciation rate at 0% for non-residential buildings with a useful life of 50 years or more.
Key points
- 0% depreciation rate: while buildings will remain depreciable property, there won’t be any depreciation deductions, ensuring historical depreciation deductions are recoverable when the building is disposed of.
- Applicability: the 0% rate applies to all long-lived buildings, regardless of when they were acquired, based on a whole-of-life assessment of their useful life as listed in the IRD depreciation tables.
- Special depreciation rates: the Commissioner will no longer have the authority to set special depreciation rates for long-lived buildings.
- Transitional provision for commercial fit-out: owners of buildings acquired before the 2010–11 income year who separated the commercial fitout component of their buildings using a 15% of the total building cost rate can still separate the cost of commercial fit-out using these rules and continue to depreciate it separately at a reduced straight-line rate of 1.5%.
Review your assets
As you prepare for the 2025 tax year, it’s important to review your current assets and depreciation schedules to ensure compliance and optimise tax planning strategies within the revised framework. Your provisional tax calculations may need to be adjusted.
Please get in touch with us to discuss how these changes impact your specific financial situation.
