Hotel Depreciation Specialists
Depreciation schedules for hotels and pubs
Every year hundreds of hotel owners around Australia are paying more tax than they have to because they are not claiming the maximum deductions available to them for capital allowance and depreciation of their building and assets.
Why get a depreciation schedule for my hotel?
A capital allowance and depreciation schedule, prepared by a specialist quantity surveyor, will ensure you are claiming the maximum tax deductions possible for the depreciation of your building and plant and equipment assets.
Depreciation is a tax deduction you can claim for the ageing and wearing out of your building, fit-out and hotel assets. Learn more about commercial building and asset depreciation here.
With a depreciation schedule a hotelier can typically claim tens of thousands of dollars in additional tax deductions. These tax deductions reduce the taxable income of the owner and therefore the income tax payable.
A commercial depreciation schedule can add tens of thousands of dollars to cash flow every year.
“Well, what can I say? Capital Claims helped me no end and were absolutely fantastic with the service. I could not believe what I have not claimed since I have owned the hotel. I would highly recommend people to do this for their business. The cost and what you save! First year I saved $17,000 straight up by doing this. What a great service. Thank you once again.”
Luke Noble, Imperial Hotel, Wee Waa
Case study - Small inner city pub
Purchased freehold in 2015 for $1,165,000;
Refurbishment completed by previous owners, but no updates since;
Has some gaming facilities but no accommodation;
Tax deductions for capital allowance and depreciation across the first 5 years – $389,500.
Case study - large country hotel
Purchased in 2018 – Leasehold purchased for $1.9 million and building freehold for $3.7 million (purchased in separate entities);
Building and fit-out have had multiple updates and refits over the years;
Leasehold includes multiple bars, bottleshop, gaming facilities and accommodation.
First year deductions – $135,557.
Deductions over first 5 years – $597,037.
Everything you need to know about claiming depreciation for your hotel
A hotel depreciation schedule is a comprehensive report that itemises details regarding the structure of the hotel building (total build costs, effective life, depreciation claimable), as well as the plant and equipment assets of a hotel (asset values, effective lives and annual depreciation claimable). Using this detailed report, prepared by a quantity surveyor, hotel owners can claim depreciation as a tax deduction when lodging their financials to the ATO each year. These tax deductions reduce taxable income and reduce the tax payable by the business. In short, a depreciation schedule improves the cash flow position of a hotel each year.
Both freehold and leasehold hotel owners can benefit from claiming tax deductions for the depreciation of their assets each year.
Freehold hotel owners
Freehold hotel owners typically own the structure of the hotel and the key infrastructure assets. These assets are likely to include air conditioning, hot water systems, refrigeration assets etc. Freehold owners can claim for depreciation of the building structure, and separately for any key assets they have paid for and provide within the lease.
It is not uncommon that a hotel owner may own the building in one entity and lease and operate the business in another. A depreciation schedule will be required for each entity.
Leasehold only hotel business owners
Leaseholders typically own the fit-out of the hotel (if paid for), including furniture, floor coverings bar fit-out, partition walls, poker machines etc. Leasehold owners can claim depreciation for any building works they have paid for, along with all of the plant and equipment assets they own within the establishment.
A depreciation schedule allows for hotel owners to maximise the tax deductions for depreciation available to them, and improves the cash flow of the business each year. Each year a hotel owner does not have a schedule, they are missing out on tens of thousands of tax deductions that can make a significant difference to any tax liabilities. The best time to get a report completed is straight away.
Benefits during the acquisition process
During the acquisition process, or as soon after purchase as possible is the ideal time to have a depreciation schedule completed. The process of having a depreciation schedule completed now will assist in the dissection of asset pools and the valuation of assets within the contract of sale. Having the assets valued accurately as this time can have flow on benefits for many years – read here to learn more about our advice of managing asset values versus goodwill in the contract of sale.
After any major refurbishment
This is the ideal time to have any exiting schedules reviewed to ensure assets are valued and scrapped for maximum effect, and effectively dealt with going forward. At this stage also, new acquisition works can be accurately captured and forecasted for maximum future claims.
Learn more about maximising depreciation when renovating a hotel.
Anytime if you discover you don’t have a depreciation schedule, or you don’t have a good one
The great news here is that even if you have been operating for some time without a quality depreciation schedule, you can back claim for tax deductions that have not been claimed in previous years (typically up to 4 years). Whilst there is some cost in having a schedule done and amending previous tax returns, we have only seen the benefits far outweigh the costs with hotel owners typically claiming tens of thousands of dollars in deductions that were previously unclaimed. This can provide an immediate cash flow boost to any business in the way of a tax refund (or applied as a credit against any ATO debts).
Pubs are unique in terms of building costs, and included industry specific assets. The build and fit-out of a hotel is very different to a residential house or a generic commercial office building.
An experienced, specialist quantity surveyor is the best person to complete a depreciation schedule for a hotel owner. A quantity surveyor will be able to estimate historical construction dates and costs, as well as value industry specific plant and equipment assets. This is particularly important within the industry as hotels undergo regular upgrades and transformations to adapt to consumer tastes and preferences. All of those historical and new works must be assessed, costed and accounted for accurately in order to maximise the tax deductions available.
Accountants are not able or qualified to cost historical building works or value plant and equipment assets.
Deductions can vary significantly, dependent upon the size and fit-out of the hotel. A smaller, regional hotel with a modest fit-out could expect to see annual deductions in the tens of thousands of dollars. A substantial CBD hotel with quality fit-out and inclusions should see tax deductions valuing hundreds of thousands of dollars across the first few financial years.
To smart hotel owners, engaging a the right quantity surveyor, a depreciation schedule is an incredible investment. A depreciation schedule for a hotel can cost from a few thousand dollars for a simpler hotel, up to around $10,000 for a substantial establishment that includes accommodation, restaurants etc.
But the return on investment is huge with most schedules reporting hundreds of thousands of dollars in deductions in just the first few years.
Hotel Depreciation Blog Articles
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Capital Claims Tax Depreciation was established over 10 years ago and continues to be a leader in the field of quantity surveying for depreciation purposes.
Our business leaders individually have over 20 years experience in this industry alone and have presented on this topic nationally at conferences, expos, seminars and in print.We are registered tax practitioners and our leaders are members of the Australian Institute of Quantity Surveyors.