Here are five tax time depreciation tips for hoteliers, to help ensure you’re claiming everything you’re entitled to.

1. Claim for new and old hotels

Both new and older hotels will attract some depreciation deductions. It is a myth that older hotels do not attract a claim. 

Although the Australian Taxation Office (ATO) places restrictions on claiming capital works deductions (depreciation for the structural elements of a property, such as roofs, walls and floors) there are no date restrictions for depreciating plant and equipment assets. 

The ATO advises that the owner of any commercial property in which construction commenced after the 20th of July 1982 can claim capital works deductions. On the other hand, depreciation deductions for plant and equipment assets are calculated based on the individual effective life for each item set by the ATO. 

Deductions for plant and equipment are also dependent on each asset’s condition and quality. As these items are rarely the same age as the property, generally having been updated over time, there are often significant deductions available to the owner for plant and equipment depreciation claims.

So in a nutshell, if a hotel’s structure is too old for a depreciation claim, the owner can generally still claim for the plant and equipment assets contained within. 

2. Claim renovations completed by previous owners

Any renovations completed to a hotel can also be claimed, even if they were completed by a previous owner. 

This includes items which may not be obvious such as new plumbing, water-proofing or updated electrical wiring. 

For capital improvements of a structural nature to qualify as a capital works deduction, the renovation must have commenced within the qualifying dates set by the ATO. 

Recently installed plant and equipment items are also likely to receive higher depreciation deductions. This is due to the increased costs involved in purchasing and installing these assets and the condition the assets are likely to be in when a specialist Quantity Surveyor makes their assessment.

3. Both tenants and owners are entitled to claim depreciation for any fit-out

Commercial tenants, or those in a leasehold situation, can claim depreciation for any fit-out they add to a hotel once their lease commences. This includes items such as desks, bedding, blinds, shelving, televisions, carpets, vinyl, fire fighting equipment and security systems. 

If lease conditions mandate a tenant return the hotel to its original condition when the lease ends, they may also be able to claim a write-off for any remaining depreciable value available on scrapped assets. 

This 100 per cent deduction must be done in the same year as the item is removed from the hotel. Any assets a tenant leaves behind after the tenancy has ended can also be claimed by the hotel owner. 

Deductions for fit-outs can become very complicated, so it is important to consult with an expert.

4. Don’t wait if you have only just purchased a hotel

Investors will often wait until the next financial year to claim depreciation deductions if they have only just purchased a property or have just started operating their hotel. However by doing so, they are missing out on valuable cash flow that can be particularly beneficial so soon after outlaying substantial funds to secure the hotel. 

In such a situation, a hotel owner or operator can make a partial year claim, even if they have only owned or been operating the hotel for a matter of weeks or months in that financial year. 

Specialist Quantity Surveyors use legislative tools to make partial year claims more beneficial to hoteliers. It is worth consulting an expert to find out what claims are available. 

Investors can also claim the tax depreciation schedule fee straight back in the same financial year if they arrange the schedule before the 30th of June.

5. Previous year’s tax returns can be adjusted

If a hotelier has not been claiming depreciation, the previous two financial year’s tax returns can be amended. 

A tax depreciation schedule can provide the details of any deductions missed for the investor to make a claim and recoup these deductions. 

To order a schedule so you can start claiming depreciation deductions this tax time, apply online now. 

See other articles by BMT relating to hotels below:

Freehold vs. leasehold – what does this mean for hotel depreciation?

Can you claim depreciation for an older hotel?​

What depreciation deductions are hotel owners entitled to?​

This is a promoted article.