Budget negative gearing changes put small commercial property on investor radar: BMT

As property investors digest the 2026 Federal Budget, smaller commercial assets may become a more prominent part of the conversation for those weighing up their next purchase. 

Commercial property is not included in the proposed residential negative gearing changes, placing it in a different tax position for property investors.

According to new data released by BMT Tax Depreciation, sub-$1 million commercial properties are delivering notable depreciation deductions for investors assessing smaller commercial assets. 

BMT data shows notable depreciation deductions

The findings, drawn from BMT Tax Depreciation commercial depreciation schedules completed during the 2025-26 financial year to-date, show properties purchased for $1 million or less delivered average first full year depreciation deductions of $13,659, and average deductions of $62,720 over the first five years. 

BMT Chief Executive Officer Bradley Beer said the findings may place smaller commercial assets into consideration for some investors comparing property types in similar price ranges.

“Many investors looking around the $1 million mark focus primarily on residential property,” Mr Beer said. 

“But smaller commercial assets such as offices, industrial units, retail spaces and consulting rooms can also sit within a similar price range and may offer meaningful depreciation deductions.”

BMT's analysis also found commercial properties purchased for $1.5 million or less delivered average first full year depreciation deductions of $16,404, and average deductions of $75,485 over the first five years.

Cash-flow remains a key consideration

Mr Beer said depreciation is often an important consideration because it can support after-tax cash flow without requiring additional out-of-pocket spending. “Strong depreciation deductions in the early years of ownership may help improve cash-flow, particularly when holding costs are higher,” he said. 

“For some investors, that may become more relevant if proposed residential negative gearing changes alter how losses are treated.”

Investors may broaden their property search

Mr Beer said the Budget discussion may encourage investors to broaden the types of properties they assess before purchasing.

“Commercial property is often associated with large-scale assets, however smaller commercial investment can be accessible to some investors who may have otherwise only considered residential property,” he said.

“Commercial properties were also excluded from the 2017 residential depreciation changes, meaning some owners may still be able to claim depreciation on second-hand plant and equipment assets, depending on their circumstances.”

Tax treatment should be considered alongside broader risks

Mr Beer said investors should consider tax treatment alongside broader investment factors before purchasing any property.

“Commercial property also carries different risks and lending considerations compared to residential assets,” he said. “For investors weighing up residential and commercial assets, the key is understanding the tax treatment, risks and cash-flow position before they buy. A depreciation estimate or schedule can help identify potential deductions and support a more informed investment decision.”

This information is general in nature and does not consider personal circumstances. Tax outcomes depend on individual situations and current legislation. Investors should seek independent advice from their accountant before making decisions based on this information.