Commercial Tax depreciation experts, Capital Claims, give expert advice on how hospitality operators can maximise their deductions.
Director of Capital Claims, Mark Watkins, has provided some crucial insight into how hospitality vendors can ensure they receive the tax deductions they’re entitled to, with advice pertaining to: equipment value, inventory keeping, refurbishments and depreciation.
Maximising the value of equipment when purchasing
“In most cases, you will want to ensure the value of plant and equipment assets are maximised when purchasing,” Watkins says.
For hospitality owners and operators, this means either leaving the contract values for equipment blank, or ensuring a depreciation schedule is in place prior to purchase. As the vendor is likely to have been claiming depreciation already, so asset values will be close to minimum, leaving less room for the new owner to claim depreciation.
Quantity surveyors can be engaged to revalue assets, based upon their actual condition and future use requirements – effectively giving assets new ‘lives’ with the Australian Tax Office (ATO).
Watkins is also keen to stress that depreciation deductions are available for lease and freehold operators, even if they do not own their building.
“All operators are entitled to claim for operating assets, as well as any fit-out (including construction) which they have paid for themselves,” Watkins says.
“Freehold owners can additionally claim for qualifying capital allowance – depreciation of the building itself.”
Ensure inventory is kept up to date
Watkins explains that detailed inventories, including the current value of equipment assets, is crucial for optimal deductions.
“We often find that inventory lists are incomplete from the beginning, or have not been updated and maintained as assets are disposed of, replaced and added,” Watkins says.
A surveyor can inspect a venue and produce a detailed and correct inventory, ensuring maximal deductions.
Finally, ensure your depreciation schedule has been produced by a professional specialising in commercial venues
“There are a number of quantity surveyors that complete depreciation schedules for investment properties in Australia, but few are specialists in commercial properties,” Watkins says.
By engaging the a services of a specialist, hospitality operators are far more likely to receive the deductions they are entitled to.
Capital Claims gives the example of Tom, whose company owns a large country pub in Wagga Wagga. The leasehold of the pub was purchased for $1.9million, and the freehold for $3.7million. The venue has been refitted and refurbished several times over the last few years.
After engaging Capital Claims to perform a tax depreciation schedule, Tom was able to claim $135,557 in the first year, and just under $600,000 over the first five years of the contract.
This example illustrates the amount of money that hospitality operators are leaving on the table by not ensuring their depreciation deductions are properly assessed.
Disclaimer: Food and Beverage Media does not provide tax or accounting advice. This material has been prepared for informational purposes only and should not be relied on for, tax or accounting advice. You should consult your own tax and accounting advisors before engaging in any transaction.