If you're buying an established commercial property, the new negative gearing restrictions aren't something you need to worry about. They apply to residential property, not commercial.
Commercial property isn't completely outside the reforms, though. The CGT changes from 1 July 2027 also apply to commercial property held by individuals, trusts and partnerships. They only apply to gains that accrue from that date, which matters if you buy before then and sell later.
Depreciation is one area where commercial property differs significantly from established residential property. The 2017 restriction that prevents most buyers of established residential property from claiming the existing plant and equipment doesn't apply to commercial property. For an established office, shop or warehouse, that means the plant already in the building can generally be claimed, along with the building itself where its construction dates qualify. How any of it applies to you depends on your circumstances, so confirm your position with your accountant.
What did the 2026 tax changes do to commercial property?
Two of the 2026 Budget tax changes, now law under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, land differently on commercial property.
Negative gearing. From 1 July 2027, the changes limit negative gearing for residential property investments to new builds, with residential property already held at the 7:30pm AEST, 12 May 2026 cut-off exempt. Commercial property isn't covered by the change and continues under the existing rules. If you want the full picture, this negative gearing reform breakdown covers who is and isn't affected.
Capital gains tax. This is a broader reform rather than a commercial property measure, but it applies to commercial property too. From 1 July 2027, the 50% CGT discount for individuals, trusts and partnerships is replaced by cost base indexation and a 30% minimum tax rate on capital gains. It only applies to gains that accrue from 1 July 2027, so for a property bought before then, it's the growth from that date onwards that falls under the new rules.
Here's how an established commercial purchase compares with an established residential one bought after the cut-off:
| Established residential, contract from 7:30pm AEST 12 May 2026 | Commercial property | |
|---|---|---|
| Negative gearing from 1 July 2027 | Losses offset against residential rental income and carried forward, no longer against other income such as wages | Existing rules continue |
| CGT from 1 July 2027 | Indexation and 30% minimum tax replace the 50% discount | Same change applies |
| Existing plant and equipment (Division 40) | Restricted since 9 May 2017 | Claimable |
| Building structure (Division 43) | Claimable, subject to construction date | Claimable, subject to construction date |
Can you claim depreciation on a commercial property you've just bought?
Generally, yes, and on more of what's in the building than a buyer of an established residential property can.
Tax depreciation lets property investors claim deductions for the wear and tear of a building (Division 43 capital works) and the plant and equipment inside it (Division 40). These deductions can lower taxable income, which may reduce the tax payable, depending on individual circumstances.
The difference for commercial buyers comes from a rule introduced in 2017. Since 9 May 2017, Division 40 deductions on previously used plant in second-hand residential property are restricted to the original owner or installer. New property, new plant the investor installs, substantially renovated property and commercial property are not affected.
Picture two investors settling on the same day. One buys a 15-year-old house to rent out, the other a 15-year-old warehouse. Both can generally claim the building structure. The warehouse buyer can generally also claim the air conditioning, carpets and light fittings that came with the property. The house buyer generally can't claim the plant that came with the house, only plant they install themselves.
Division 43 capital works are generally claimed at 2.5% a year for up to 40 years from completion of construction (a 4% over 25 years rate applies to limited categories). For most commercial buildings, the original construction must have commenced on or after 20 July 1982 (earlier for some hotels and other short-term traveller accommodation), but later renovations, extensions and structural improvements carry their own claims even where the original building is older.
For the rate table by property type and how owner and tenant claims work together, see the full guide to commercial property depreciation.
What to sort out before settlement
Most of this takes a phone call or an email during the contract period, and it's much harder to piece together after settlement.
Start with the building's history. Construction records, plans and records of later works make it easier to establish what qualifies as capital works and when, though they aren't essential: the ATO recognises quantity surveyors (TR 97/25) as appropriately qualified to estimate construction costs where actual costs are not known. If the vendor has a depreciation schedule, don't simply rely on it. It can be useful background, particularly for understanding the building's construction history and existing assets, but the deductions available to you need to be worked out from the date you acquire the property.
Then look at the contract and the leases. The allocation of the purchase price between land, building and depreciating assets can affect the deductions available to you. Raise it with your accountant and conveyancer before signing, so the allocation is properly documented and supportable. If the building is tenanted, the leases help show whether existing fitout belongs to you or to the tenant, who claims their own fitout separately.
If you're buying through an SMSF, from a related party, or changing how the property is owned, your accountant may also recommend an independent valuation. TDA Valuations prepares commercial stamp duty, SMSF and CGT valuations.
The last piece is the depreciation inspection. A site inspection by a quantity surveyor helps identify the plant, equipment and capital works available for depreciation, so the report reflects the property as you acquire it. At TDA, commercial depreciation schedules include a site inspection, and booking it around settlement means your accountant has the figures from your first year of ownership.
What the CGT change means if you're buying now
If you buy before 1 July 2027 and still own the property after that date, its value on 1 July 2027 may matter when you eventually sell, because that's where the new rules take over. The 1 July 2027 valuation explainer covers when a valuation might be worth discussing with your accountant.
Frequently asked questions
Does negative gearing still apply to commercial property?
The 2026 negative gearing changes are limited to residential property, so commercial property continues under the existing rules. How negative gearing applies to your own position is a question for your accountant.
Do the 2026 tax reforms change depreciation on commercial property?
No. The negative gearing and CGT changes don't change how Division 40 and Division 43 deductions work for commercial property.
Can I claim depreciation on an older commercial building?
Often, yes. Plant and equipment in the building can be claimed regardless of the building's age. For most commercial buildings, the original structure qualifies if construction commenced on or after 20 July 1982, and later renovations or extensions can be claimed from their own completion dates.
Can I use the previous owner's depreciation schedule?
Not on its own. It can help with the building's construction history and existing assets, but the deductions available to you need to be worked out from the date you acquire the property.
Key takeaways
- The 2026 negative gearing changes apply to residential property, not commercial.
- The CGT changes from 1 July 2027 also apply to commercial property held by individuals, trusts and partnerships, on gains that accrue from that date.
- The 2017 restriction on existing plant and equipment doesn't apply to commercial property, so buyers of established commercial buildings can generally claim it.
- A vendor's schedule is useful background, but your deductions are worked out from the date you acquire the property, and the groundwork is easiest around settlement.
Get a depreciation schedule for your commercial property
Whether you're buying an office, shop or warehouse, TDA's quantity surveyors prepare commercial depreciation schedules scoped to your property. Reports are completed within 3 to 5 business days from receipt of all requested information and inspection completed.
Call 1300 417 317 or request a quote for your commercial property.
This article is general information only and isn't tax, financial or investment advice. TDA prepares depreciation schedules and valuations; we don't advise on whether to buy a property or how to structure your tax. Speak with your accountant about how these rules apply to your circumstances.
