Domestic travel is growing. Comparing the June 2022 quarter to the June 2019 quarter, there was an increase in domestic holiday spending of 60 per cent or $5.2 billion, the biggest increase since before the pandemic. Domestic travel is forecast to return to around its pre-pandemic level in 2022-23, then surpass that previous peak in 2023-24.
Part of this growth is holiday park stays. According to figures from accounting firm BDO Australia and the Caravan Industry Association, holiday and caravan park revenue has increased twenty per cent above pre-pandemic levels in the first five months of 2022.
Holiday parks are a popular domestic destination for millions of Australians thanks to their variability.
With domestic travel picking up, now is the time for holiday park operators to ensure they’re claiming maximised depreciation deductions. Here, we demonstrate what depreciation deductions look like in a holiday park and how applying government incentives can further boost cash flow.
The Australian Government introduced various temporary incentives and policies to boost economic growth and support businesses throughout the COVID-19 pandemic.
These incentives include temporary full expensing, increased asset write-off and backing business investment. One of the most significant was temporary full expensing where eligible businesses can claim an immediate deduction for the business portion of the cost of an asset in the year it is first used or installed ready to use for a taxable purpose. Find more information on the available incentives here.
Depreciation deductions in a holiday park
Holiday parks attract domestic travellers due to their wide range of facilities and flexibility. They’re family friendly, many are pet friendly, and there are a variety of pricing and accommodation options to suit all budgets. They’re also typically found in stunning locations with offsite attractions close by.
Some commonly found claimable capital works deductions in holiday parks include reception buildings, playgrounds, BBQ shelters, picnic tables, swimming pools, cabins and amenity blocks.
Commonly found depreciable plant and equipment items include power units for powered sites, air conditioning units, furniture, blinds, linen, towels, jumping pillows and swimming pool filtration systems.
The case study below demonstrates what depreciation deductions look like in a holiday park.
Hypothetical case study: Shell Holiday Park
‘Shell Holiday Park’ is located on the South Coast of New South Wales and has a wide range of onsite facilities including cabins, powered and un-powered camping and caravan sites, a large swimming pool, playground, water playground, a modern shower and bathroom block, laundry, BBQ’s, picnic areas and a recreation room. In 2021 Shell Holiday Park was purchased by new owners who completed renovations and upgrades in the same year.
Please note this table does not display every division 40 asset calculated in the total and some have been grouped together.
The owners of Shell Holiday Park claimed a total of $10,950,809 in depreciation deductions across the first five years in both divisions, throughout the life of the property they will boost cash flow ever further.
Because the owners applied temporary full expensing on the upgrades completed in 2021, they were able to claim the qualifying plant and equipment assets as an immediate deduction resulting in a high first-year depreciation claim.
By applying temporary full expensing, the owners of Shell Holiday Park were able to use the improved cash flow to build a kids swimming pool, update cabin furniture expand the picnic facilities for the next season.
To claim maximised depreciation deductions, holiday park operators should get in contact with a specialist quantity surveyor to organise a tax depreciation schedule.
BMT Tax Depreciation has been specialising in commercial depreciation for over twenty years. The team applies industry-specific legislation to ensure all commercial property owners and tenants claim depreciation to its full potential, while maintaining full Australian Taxation Office compliance.
To find out more about how holiday park owners and lessees can claim maximised depreciation deductions call BMT on 1300 728 726 or Request a Quote.