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Boutique hoteliers can boost their cash return with depreciation

BMT team — Tue, 04 Feb 2020 21:43:26 +0000

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 Boutique hotel depreciation case study 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. You might also enjoy: 6 hotels offering a unique travel experience Pub, hotel and tavern owners can tap into depreciation deductions too Hotel freehold vs leasehold – what does this mean for depreciation?

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6 hotels offering a unique travel experience

BMT team — Thu, 16 Jan 2020 22:11:46 +0000

The hotel industry is everchanging to cater to the needs of the modern-day traveller. Hotel guests no longer want a simple place to rest their head. Instead, they want an experience. No hotel is too unique to reap the benefits of tax depreciation. If you own or operate a hotel, no matter how remote the location or small the structure, you could be entitled to hundreds of thousands of dollars in depreciation deductions. From the architecturally grand to the completely obscure, here are six unique hotels changing the game. 1. Freycinet Lodge – TAS Freycinet Lodge is for travellers who want to immerse themselves in nature. Nestled on the edge of Freycinet National Park on Tasmania’s east coast, this eco-lodge boasts a location that is second to none. The luxury development consists of nine architecturally designed pavilions with stunning views of the national park and coastline. The accommodation is both intimate and expansive with the top of the range pavilions featuring floor-to-ceiling glass windows and natural timber walls. 2. The Collectionist Hotel – NSW The Collectionist Hotel prides itself on choice. No two rooms are the same in this eclectic Sydney hotel and guests have the option to choose their interior upon arrival. There are no basic beige walls or stock standard white sheets to be found here. With a collection of 39 custom designed rooms and interiors, guests are encouraged to ‘choose different’. The Collectionist Hotel is a collaboration between four Australian design studios and is the perfect antidote to cookie cutter design. 3. Alkira – VIC Travellers looking for a truly unique experience should take note of Alkira Eco-Glamping Retreat. This snug straw-bale yurt can be found on a 40-acre property in Emerald, Victoria. As a part of the stay, guests can explore the surrounding farm and soak up the pristine natural surrounds. 4. COMO The Treasury – WA COMO The Treasury is a Perth-based hotel featuring 48 elegant guest rooms and suites which boast original high ceilings, cornicing, and balconies. Set in a 19th-century former government building, the hotel uses a simplistic colour palette to capture a sense of serenity in heart of the city. Guests can enjoy two restaurants, a bar, lounge, library and 20 metre indoor pool. 5. Longitude 131 – NT It doesn’t get much better than this when travelling to the red centre. Longitude 131° has some of the best views of Uluru. It should come as no surprise as the hotel’s name refers to the precise location of the famed natural landmark. Each room has a tent-like interior and full-length windows so guests can admire the incredible desert expanse. 6. Notel – VIC Notel consists of six airstream trailers positioned speak-easy style on the roof of a nondescript Melbourne car park. True to form, it’s called Notel because it’s like no other hotel. The retro trailers, which are similar to tiny homes, have been fully renovated and are bursting with bright pink décor. It’s easy to see why this hotel is a hot spot for Instagram influencers and trendy travellers. No hotel is too unique to claim depreciation As a building gets older and items within it wear out, they depreciate in value. The Australian Taxation Office (ATO) allows owners of income producing property, including hotels, to claim deductions related to the building’s structure as well as the plant and equipment items contained within the property. 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 a commercial property in which construction commenced after the 20th of July 1982 can claim these deductions at a rate of 2.5 per cent. Unlike capital works, there are no date restrictions for depreciating plant and equipment assets in commercial properties. Depreciation deductions for these assets are calculated based on each item’s individual effective life as set by the ATO. Discover the tax depreciation deductions your hotel accommodates here. As Australia’s leading property tax depreciation specialist, BMT Tax Depreciation understand that every commercial property is different. Using industry specific legislation, a specialist site inspector will assess your hotel to ensure every deduction is uncovered and maximised. This includes any fit-out installed or assets removed during a renovation. To find out more, visit bmtqs.com.au or speak to the expert team at 1300 728 726 today. You might also enjoy: Hotel freehold vs leasehold – what does this mean for depreciation? Pub, hotel and tavern owners can tap into depreciation deductions too Hotels, motels and B&Bs – the benefits of investment

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Hotel freehold vs leasehold – what does this mean for depreciation?

BMT team — Fri, 06 Jul 2018 00:07:19 +0000

When hoteliers request a tax depreciation schedule for their property, there are usually three main scenarios: Freehold, which is where the client owns the building only, not the business that operates from it Leasehold, where the client owns the business only, not the actual property The client owns both the business and the building Depending on which of these situations apply, how depreciation can be claimed will vary. Let’s consider how depreciation can be applied in each of these situations. It’s important to remember that for any commercial property, both the tenant and the landlord or owner are eligible to claim depreciation. Contents: Scenario 1 – Freehold Scenario 2 – Leasehold Scenario 3 – The client owns both the business and the building How a tax depreciation schedule can help Scenario 1 (Freehold) In a freehold scenario, the client owns the actual building or the property, but the not the hotel business that operates from it. As such, they are generally entitled to claim the capital works deduction, which relates to the structure of the building, as well as any fixed assets they own as landlords which may include items such as hot water systems, air conditioning systems and carpets. They will not be entitled to claim depreciation deductions for any plant and equipment assets owned or installed by the hotel operator. This may include assets such as furniture, linen and cutlery. As legislated by the Australian Taxation office (ATO), the owner of any commercial building or hotel constructed after the 20th of July 1982 will be able to claim the capital works deduction over a forty-year period. Depending on the date of construction, either 2.5 per cent or 4 per cent of the property’s historical construction cost per year can be claimed as the capital works deduction. Scenario 2 (Leasehold) In this situation, the client owns the business only; not the actual building. As such, they can be viewed as the “tenant”. BMT Tax Depreciation has found that in most situations like this the client has purchased an already established and operating business. Whether they have purchased an established business or have started it from scratch, they would be able to claim depreciation for any plant and equipment assets they own or any new assets purchased for the hotel fit out. This may include assets such as bedding, linen, tables and chairs, reception furniture, glassware and cookware. These assets all have an effective life and will depreciate at a set rate, as determined by the ATO. Being in a leasehold agreement, they will not be able to claim the capital works deduction, as this sits with the building owner. Nor will they be able to claim any plant and equipment assets owned by the owner or landlord. Scenario 3 – They own both the business and the building Usually (but not always) in this scenario, there are separate entities to take into consideration. There may be one entity that owns the building, perhaps a trust, and another that owns the business and any associated plant and equipment assets. The same rules as above would apply when claiming depreciation in this scenario. The benefit is that overall, they would be eligible to claim both the capital works deduction and depreciation deductions for plant and equipment assets. How a tax depreciation schedule can help When a property owner and hotel operator are both claiming depreciation for various assets in the same building, things can quickly get confusing. It can be hard to determine who owns what and what each party can legally claim depreciation for. There is where the value of a professional Quantity Surveyor is realised. A Quantity Surveyor will help either or both parties identify the assets they’re legally entitled to claim deprecation for and will maximise the depreciation deductions available for both parties. This will also help ensure legal compliance when it comes to claiming depreciation, in the case of an ATO audit. If either of these scenarios apply to you as a hotel owner or operator, you can visit our commercial property depreciation page for more information.

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Can you claim depreciation for an older hotel?

BMT team — Fri, 18 May 2018 01:03:24 +0000

One of the main reasons hotel owners fail to take advantage of depreciation deductions is because they believe their hotel is too old to warrant making a claim. According to Bradley Beer, the Chief Executive Officer of BMT Tax Depreciation, this myth is seeing hotel owners lose out on thousands of dollars each year and needs to be dispelled. “Often investors make the mistake of thinking they will not receive deductions for an older property due to the date restrictions the Australian Taxation Office (ATO) place on claiming the available capital works allowance,” said Mr Beer. “The reality is that any hotel, no matter how old the building is, will entitle its owner to valuable deductions in the form of depreciation. “This is largely because the owner is also entitled to claim depreciation for any renovation work that has taken place since the qualifying date as well as for the plant and equipment assets contained within the property,” said Mr Beer. Although current ATO legislation states that the owner of any commercial property built before the 20th of July 1982 cannot claim the capital works allowance as a deduction, depreciation of plant and equipment is not restricted by age. It is the condition and quality of each item which contributes to the depreciable amount. Capital works and renovations Older hotels will have often had some form of renovation work completed to them after the legislated dates set by the ATO. This may be minor renovations to particular rooms, work to the hotel’s structure or a large-scale renovation. This may include things such as replacing the roof, replacing retaining walls, adding a garage, balcony or pool, or installing new floor and wall tiles as part of a bathroom remodel, for example. If any such renovation work was completed after the qualifying date, they will attract the capital works allowance. Depreciation of plant and equipment items A tax depreciation schedule not only covers the capital works allowance, but also the depreciation of plant and equipment items. Plant and equipment assets are considered to be the “removeable” fixtures and fittings in a property. There are many plant and equipment items in hotels that will attract a depreciation claim. This would include everything from bedding, tennis court nets, pool accessories, crockery and cutlery, furniture, curtains, carpets, light fittings and computer equipment, to name just a few. So even if a hotel is too old to claim the capital works allowance, there will likely still be thousands of dollars worth of deductions to claim from the plant and equipment assets contained within, as the depreciation of these assets is not restricted by age, but rather the condition and quality of each individual asset, as determined by the ATO. It’s always worth enquiring about depreciation When in doubt, hotel owners should always seek expert advice, as it’s likely that they will always have some form of depreciation to claim whether it be from capital works, renovations or plant and equipment assets. A specialist Quantity Surveyor will perform a site inspection of the property to identify any deductions available from plant and equipment assets and for renovations that have been completed to a property of any age. The depreciation claim from these sometimes unexpected assets can help a hotel owner’s cash flow tremendously. And as depreciation is a non-cash deduction, the owner or investor does not need to spend any money in order to claim it.

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Pub, hotel and tavern owners can tap into depreciation deductions too

BMT team — Mon, 24 Apr 2017 04:38:46 +0000

We’ve all heard the line, ‘a man walks into a bar’ and waited for the joke at the end of the sentence, but when a tax depreciation specialist walks into a bar it’s no laughing matter as there is much more to uncover. Many pub, hotel and tavern operators are losing thousands annually by failing to have a tax depreciation schedule prepared for their property. Items such as drink dispensers, gaming machines, chairs and tables, glassware, carpet, air-conditioning units, glass washers, A/V equipment, cool room refrigerators and even the bar itself are all depreciable. It’s essential to contact a specialist Quantity Surveyor such as BMT Tax Depreciation to arrange a tax depreciation schedule to ensure the available deductions for these items can be claimed. As part of the process of arranging a depreciation schedule for any commercial property (including pubs, hotels and taverns) our specialist staff will perform a site inspection to uncover the structural and fixed items which can be claimed as capital works deductions as well as all of the removable plant and equipment assets contained within the property. They will also uncover any renovations that have been completed to the property, even those completed by a previous owner. As pubs, hotels and taverns are frequently renovated by their owners, it is also important to be aware that additional deductions may apply when renovating. A depreciation schedule should be arranged prior to commencing any renovation work and updated after the renovation is complete. This will ensure the owner can claim deductions for the remaining un-deducted depreciable value of any assets scrapped and removed during the renovation and also include deductions for newly installed assets. The following table provides an example of the deductions we found for the owner of a hospitality establishment purchased for $3,107,060. As this example shows, the depreciation deductions can be quite substantial. In the first full financial year alone, the owner of this property could claim $288,312 in depreciation deductions. Over the life of the property, the deductions for the owner of a hotel, pub or tavern can total in the millions of dollars. To learn more about claiming depreciation for any commercial property, visit our commercial property depreciation page.

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