A tax saving of R3.5m in first year for a newly developed shopping centre

Development of Shopping Centre

Instructed by a private property company to advise on the availability and level of capital allowances following the development of a major shopping centre for approximately R480m and with a rentable area approaching 65,000m2.

Having obtained and analysed all relevant cost information obtained from the client and their quantity surveyors, including the detailed final account, supporting invoices and capital expenditure ledgers, we carried out a detailed property inspection, and were able to identify relevant qualifying expenditure to determine the level of Wear & Tear Allowances and allocate it to the appropriate financial periods.

The total level of Wear & Tear Allowances amounted to in excess of R100million, being some 21% of the development expenditure, and resulted in a tax saving in the first year of approximately R3,500,000 and over the first three years of ownership of some R10,500,000.

In addition, a large proportion of the residue of the development expenditure, being some R340million also qualified for Commercial Buildings Allowances, which attract writing down allowances of 5% per year, and therefore resulted in an additional first year tax saving of R4,760,000.