Accommodation & Food Services – Asset Lists & Tax Depreciation Deductions
When it comes to plant and equipment assets, few industries have more individual asset types than accommodation and food services. In a residential property, these include bathroom accessories, blinds, carpets, cook-tops, hot water systems, ovens and more. However, in general you’re unlikely to find much more than around 20 plant and equipment assets in any specific residential property.
When it comes to cafes/restaurants and accommodation providers, that number could be as high as three of four times that amount. Not only are there more qualifying assets, but the value of the assets are significantly higher. For example, the range hood in your home is not going to cut it in a busy commercial kitchen!
Why is this important?
It’s important from the perspective of managing the inventory of assets with the help of an asset register or asset list, and especially because the tax depreciation deductions available to commercial properties are significant.
Why is an asset list important?
Obtaining an inventory list of your assets is crucial to monitor what you own, whether to set-up maintenance schedules, recognise if something goes missing or to provide as evidence to assist a business valuation or sale. A tax depreciation schedule will group the assets into their respective categories, which will essentially merge things like chairs and tables into ‘Furniture, Freestanding – Dining Areas’ for example. This is fine for claiming tax deductions, but won’t let you know that you have 20 bar stools in the gaming room. A specialist Quantity Surveyor can be engaged to serve both purposes by inspecting the property in a way that enables them to provide a tax depreciation schedule, and an asset list that identifies the asset, its model/type and location in the premises. There will certainly be a cost saving in engaging them to prepare both reports at once, rather than separately.
Why should I engage a Quantity Surveyor to provide a commercial depreciation report?
The Australian Tax Office (ATO) actually has legislation specific to the accommodation and food services sector, with the food services sector broken down into; ‘Cafes, restaurants, takeaway food services, pubs, taverns bars and clubs.’ This legislation is part of TR 2011/2 (as at the time of writing), which is the current tax ruling which outlines the effective lives of all plant and equipment items for depreciation purposes.
To give you an example, plant and equipment items specified in TR 2011/2 under the accommodation section include, but are not limited to;
- Audio Visual Assets
- Automatic Doors
- Bathroom Accessories
- Clocks & Clock Radios
- Cook tops and Ovens
- Cooking Utensils
- Crockery & Cutlery
- Hair Dryers
- Laundry Assets
- Microwave Ovens
- Vacuum cleaners
The list well and truly goes on. In fact there are plant and equipment items that belong under other industry types, which will also exist in a property under the accommodation & food services banner. These items will attract deductions as well.
As Quantity Surveyors, we spend a great deal of time educating property owners about the advantages of tax depreciation, and ensuring they’re claiming all the deductions they’re entitled to.
This is critically important when it comes to commercial property such as cafe’s, pubs, restaurants and accommodation providers, as the depreciation claims will often be into the many tens of thousands of dollars each year.
Often commercial property owners assume that their accountant is looking after their claims, or will neglect depreciation due to the building structure being too old to claim a capital allowance deduction. Too often we see property owners not accessing their full entitlements. For the price of a phone call, you can achieve peace of mind that you’re claiming your entitlements, or speaking to someone that will help your accountant claim them for you.
MCG Quantity Surveyors are proud to be the preferred supplier of Quantity Surveying services to the Australian Hotels Association (AHA).