ED 0140 – Depreciation of Commercial Fit-Out released by the Inland Revenue concludes that:
- Where items of commercial fit-out have been historically depreciated as part of the cost of a building, the correct treatment is for these items to continue to be depreciated at the building rate (this is 0% from the 2011-12 income year).
- Taxpayers cannot retrospectively separate-out fit-out items from the building, as this is a matter of “regretted choice” (Inland Revenue will only allow re-characterisation if there is a genuine error).
KPMG disagrees that depreciation of commercial fit-out, at the building depreciation rate, is a matter of regretted choice.
If a taxpayer has not turned their mind to the depreciation alternatives (or is simply not aware that there are options), we do not see how “regretted choice” can be reasonably argued by the Commissioner.