Leasehold Improvements
Last reviewed 13 June 2026 by Nick Lim, finance broker (FBAA).
Leasehold Improvements are the fit-out and alterations a tenant makes to leased premises, such as consulting rooms, reception and plumbing in a leasehold practice. They are usually funded through fit-out finance or a business loan, and treated for tax as capital works depreciated over time rather than an immediate deduction. Because they are attached to premises the tenant does not own, lenders weigh them differently from owned security.
Why Leasehold Improvements Matters
Leasehold improvements can be a big spend on premises you do not own, so the finance and tax treatment really matter.
- Fit-out and alterations to leasehold premises
- Funded by fit-out finance or a business loan
- Treated as capital works for tax
- Depreciated over time, not deducted at once
- Weighed differently from owned security
Common Features of Leasehold Improvements
- Consulting rooms, reception, plumbing, fit-out
- Attached to leased premises
- Capital works depreciation
- Make-good obligations at lease end
- Financed over the asset's life
Official reference: ato.gov.au
What are leasehold improvements?
Fit-out and alterations a tenant makes to leasehold premises, like consulting rooms and reception.
How are leasehold improvements financed?
Usually through fit-out finance or a business loan.
How are they treated for tax?
Generally as capital works, depreciated over time rather than deducted immediately.
Why do lenders treat them differently?
Because they are attached to premises the tenant does not own, so they are weaker security.
Do I have to remove them at lease end?
Often yes, under make-good clauses, which is a cost to factor into the lease.