Boutique hotels are fast becoming the top choice for trendy travellers in 2020. With quirky charm and niche décor, they generally offer between 1 to 100 rooms. From charming rural settings to seaside bungalows, boutique hotel accommodation can be found all across the country and in various forms.
For hoteliers, keeping up with the latest design trends and accommodating for modern travellers can be costly so it’s important to be aware of any taxation benefits on offer. You may be eligible to claim hundreds of thousands of dollars in property depreciation deductions.
In this article we will consider:
Depreciation and accommodation
Property depreciation refers to the wear and tear of a building and the assets contained within it. The Australian Taxation Office (ATO) allows owners of income-producing buildings to claim depreciation for two categories: capital works depreciation and plant and equipment assets.
Capital works refers to the deductions available for the building’s structure and items deemed to be permanently fixed to it such as bricks, mortar and staircases. The owner of traveller accommodation, which refers to a hotel, motel or guest house with ten or more rooms, can claim capital works deductions at a rate of either 2.5 per cent or 4 per cent.
Owners who purchase short term traveller accommodation constructed between 21 August 1979 and 21 August 1984 are eligible to claim capital works deductions at a rate of 2.5 per cent for forty years. This is also the case for properties constructed between 16 September 1987 and 26 February 1992.
Owners of traveller accommodation constructed from 22 August 1984 to 15 September 1987 allow owners to claim at a rate of 4 per cent over twenty-five years. For properties constructed after 26 February 1992, the rate is also 4 per cent.
Plant and equipment assets are items that can be easily removed from the property such as flooring and furniture. Depreciation deductions for these assets are calculated based on each item’s individual effective life as set by the ATO.
Plant and equipment assets are items that can be easily removed from the property such as flooring and furniture. Depreciation deductions for these assets are calculated based on each item’s individual effective life as set by the ATO.
Boutique hotel depreciation case study
See how a hotelier claimed $18,738 in the first financial year alone for just one section of their property. In this scenario, the owner is claiming depreciation for a fifty-room boutique hotel featuring a rooftop beer garden.
The table below shows just a few of the depreciation deductions available for the plant and equipment assets found on the rooftop:
The boutique hotelier can claim a first-year deduction of $18,738 for the rooftop beer garden with an additional $78,138 worth of un-deducted value remaining. Given there would be several more depreciable assets within the hotel, along with capital works deductions, the claim is likely to be significantly higher.
The easiest way to ensure you claim maximum depreciation deductions for your boutique hotel is to contact a specialist Quantity Surveyor to prepare for a tax depreciation schedule. A BMT Tax Depreciation Schedule outlines all eligible deductions available over the lifetime of your property and is 100 per cent tax deductable.
To learn more about BMT Tax Depreciation or to order a schedule, contact 1300 728 726 or Request a Quote today.
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