Thank you for your response.
I agree with your point of view; however, the ATO website states the following:
“Where the fundamental nature of the property has changed either from residential to commercial or by the addition to, or fit-out of, the property, it is important to establish if the change has resulted in a different asset.
In this case, the asset is being changed from a residential property to a commercial property. As there are significant changes to the fundamental nature and use of the property, updating the premises in this case would clearly cause the property to become a different asset.”
QC43265
It appears that the ATO see the change from residential to commercial as a fundamental change in the nature of the property, regardless of whether there has been a fit out, by using the word “or” rather than “and” above.
Does this alter your view in any way?
Kind regards, Michele