Maximising Tax Depreciation for Shopping Centres with TDQS
Transform Your Shopping Centre Into a Tax-Efficient Asset
Shopping centres are rich in high-value depreciable assets, yet many property owners and investors fail to claim their full potential. With expert tax depreciation strategies, you can:
- Reduce taxable income.
- Improve cash flow.
- Reinvest savings into your property or portfolio.
In just the last six months, TDQS has prepared over 20 comprehensive depreciation schedules for shopping centres, helping clients uncover substantial savings.
Commonly Missed Depreciable Assets in Shopping Centres
1. Mechanical Services
- Air Conditioning Systems: Includes chillers, cooling towers, pumps, VSD, damper motors, and ventilation components.
- Escalators and Elevators: High-value assets often underpriced in depreciation schedules.
2. Electrical Systems
- Lighting Fixtures: Retail-specific lighting and decorative features.
- Power Distribution Boards: Frequently undervalued but critical for operations.
3. Specialty Fit-Outs
- Shopfront Glass and Partitions: Essential for retail operations but commonly missed.
- Flooring: Carpets, tiles, and vinyl—key depreciable assets in retail spaces.
4. Amenities and Common Areas
- Bathroom and Kitchen Equipment: Includes fixtures like hand dryers and water heating systems.
- Signage: Internal and external signage, including LED displays.
5. Parking Facilities
- Ticketing Systems: Technology used for entry, exit, and payment.
Car Park Lighting: High-cost assets depreciable over time.
Case Study: Unlocking $17.8 Million in First-Year Deductions for a $150 Million Shopping Centre
Overview
A client who purchased a shopping centre for $150 million engaged TDQS for a comprehensive depreciation assessment. While conducting our review, we discovered that the client was unaware of their eligibility for Temporary Full Expensing (TFE). By identifying and applying TFE to eligible assets, we delivered an incredible $17.8 million in first-year tax deductions.
Depreciation Breakdown
- Division 40 (Plant and Equipment): $33.8 million, including $15 million eligible for TFE.
- Division 43 (Capital Works): $28.8 million.
Total Depreciation Identified: $62.6 million.
The Challenge
The client’s previous assessments overlooked the potential application of TFE, which allows for immediate expensing of eligible Division 40 assets. Without the expertise to identify qualifying assets, the client stood to miss out on substantial tax benefits. TDQS was tasked with:
- Identifying TFE-eligible assets within Division 40.
- Preparing a fully compliant, optimised depreciation schedule.
- Maximising first-year deductions for immediate financial benefits.
Our Approach
- Eligibility Assessment for Temporary Full Expensing (TFE):
- Reviewed the client’s Division 40 assets and matched them against the TFE criteria.
- Identified $15 million in plant and equipment assets eligible for full expensing under the scheme.
- Optimised Depreciation Schedule:
- Applied TFE to maximise first-year deductions, providing immediate tax relief.
- Allocated the remaining Division 40 and Division 43 assets for standard depreciation rates to ensure long-term savings.
- Comprehensive Client Guidance:
- Educated the client about TFE regulations and their application.
- Delivered a detailed ATO-compliant report, ensuring audit-ready documentation.
Key Outcomes
1. Unprecedented First-Year Deductions
- Temporary Full Expensing (TFE): $15.2 million of Division 40 assets fully expensed.
- Division 43 Deductions: $600,000 (2.5% annual rate).
- Additional Division 40 Deductions: $2 million from non-TFE assets.
- Total First-Year Tax Deduction: $17.8 million.
2. Substantial Long-Term Benefits
- $62.6 million in total depreciation ensures ongoing deductions for future tax years.
- Enhanced cash flow allowed the client to reinvest in other business opportunities.
3. Improved Financial Awareness
- The client now understands the strategic value of Temporary Full Expensing and is better positioned to leverage future tax-saving opportunities.
Key Insights: Division 40 and TFE
- Division 40 Assets Eligible for TFE:
- Mechanical systems: HVAC systems, chillers, escalators, and elevators.
- Electrical systems: Lighting fixtures, power boards, and internal signage.
- Tenant-specific fit-outs: Retail shelving, partitions, and flooring.
- Division 43 Assets:
- Structural elements such as walls, roofing, and plumbing systems, which continue to depreciate at the standard rate of 2.5% annually.
Key Benefits of Choosing TDQS
- Maximised Tax Savings: Comprehensive schedules ensure you claim every eligible deduction.
- Tailored Solutions: Customised to your shopping centre’s unique assets and operations.
- Proven Expertise: Decades of experience and a proven track record with shopping centres.
- Peace of Mind: ATO-compliant schedules ready for tax filings and audits.
Features of TDQS Shopping Centre Depreciation Services
- Comprehensive Asset Identification: Includes mechanical, electrical, and specialty fit-outs.
- Detailed Depreciation Schedules: Maximised deductions for both property owners and tenants.
- First-Year Optimisation: Accelerated depreciation strategies for immediate tax savings.
