By doing so, operators and owners of pubs and taverns can reclaim thousands of dollars per year with a tax depreciation schedule.
Tax depreciation is a tax deduction claimed for the natural wear and tear of an income property and its assets over time. This is usually the second biggest tax deduction for real estate investors, after interest.
There are two types of depreciation. Capital works are claimed on the building structure and items that are permanently attached to the property. And plant and equipment works are items that can be easily removed from the property or are mechanical in nature.
Items such as beverage dispensers, slot machines, chairs and tables, glassware, carpets, air conditioners, glass washers, A/V equipment, cold room refrigerators, and even the bar itself are all depreciable.
As pubs and taverns are regularly refurbished by their owners, it is important to bear in mind that additional deductions may be available when refurbishing or installing new assets.
The Australian Government has introduced temporary tax depreciation incentives and policies to stimulate economic growth and support businesses after the impacts of COVID-19 by accelerating capital cost allowances.
These incentives include temporary total spending, an increase in asset write-offs, and support for business investment. As part of a temporary full expense, qualifying businesses may be able to claim an immediate deduction for the business portion of the cost of an asset. Businesses eligible for an increase in asset write-offs may be able to claim an immediate deduction for the business portion of the cost of an asset. And businesses eligible for support business investment may be able to deduct the cost of new assets that depreciate at an accelerated rate.
Depreciation Case Study: Newcastle Hotel
‘Business A’ is a medium sized company which operates a hotel (a pub with accommodation) in Newcastle. The hotel was purchased in 2018 for approximately $5 million and is owner operated. The hotel was extended in 2021.
The following table shows the available depreciation allowances and instant asset write-offs before and after the expansion.
In the fourth year, when the expansion took place, the owner was able to claim the full amount of the plant and equipment work due to the current temporary tax incentives, while continuing to claim construction work. fixed assets through annual depreciation deductions.
Here we can see a breakdown of the deductions for the expansion’s top five new plant and equipment assets.
This shows that there are significant deductions that can be claimed, both on depreciation and on new assets that fall under the instant asset write-off. It’s always best to talk to a trusted accountant so they can assess your financial situation.