Depreciation Deductions for a Restaurant 

Success varies between restaurateurs, yet most would agree that delicious food, a pleasant ambience, and friendly staff are key. But a healthy stream of cash flow is more important than anything. 

One way restaurateurs can improve their cash flow is by taking advantage of depreciation deductions. 

Here, we will explain what depreciation deductions are and what they look like in a busy Melbourne restaurant. 

What is property depreciation?

Depreciation is the natural wear and tear of a property and the assets within it over time. The Australian Taxation Office (ATO) allows owners of income-producing properties to claim this as a tax deduction. 

Capital works deductions (Division 43) are claimable on the building’s structure and assets permanently fixed to the property. Plant and equipment depreciation (Division 40) is claimable on assets that are easily removable from the property or mechanical in nature. 

Claiming depreciation lowers a business owner’s taxable income, meaning less tax is paid. 

Government incentives

There have been various temporary incentives and policies introduced by the Australian Government to boost economic growth and support businesses throughout the COVID-19 pandemic. 

These incentives include temporary full expensing, increased asset write-off and backing business investment. 

Under temporary full expensing eligible businesses can claim an immediate deduction for the business portion of the cost of an asset in the year it is first used or installed ready to use for a taxable purpose. 

Find more information on the available incentives here. 

Depreciation deductions in a restaurant 

There are lucrative deductions available in restaurants for both capital works and plant and equipment. Item such as ovens, fridges, carpets, glassware utensils, shelving and preparation tables are all depreciable. 

Restaurateurs who aren’t claiming depreciation are missing out on thousands of dollars annually.  

The following case study represents the available depreciation deductions in a busy Melbourne restaurant. 

Case study: The Grill House 

In 2022 Olivia purchased a busy restaurant located in Melbourne called “The Grill House” for $1.2 million. The Grill House is 76 m² in area, and seats 55 people. 

Olivia ordered a tax depreciation schedule and was pleasantly surprised with the deductions she received.  

The following table demonstrates the depreciation deductions received for each asset in the first full financial year. 

Olivia lowered her taxable income by $51,548 in the first full financial year for plant and equipment deductions; and $29,600 in capital works, a total of $81,148. 

Because she owns the building, as well as occupying it … she is entitled to claim both the capital works and plant and equipment deductions. 

As you can see, there are thousands of dollars in depreciation deductions available for restaurateurs. 

And having improved her cash flow by claiming the maximised depreciation available, Olivia was able to expand the restaurant and continue growing the business.   

To claim maximised depreciation deductions, it’s important to order a tax depreciation schedule from a specialist quantity surveyor.

Bottom Line: That schedule will outline the deductions available for every eligible asset while taking all business incentives into account and applying them to qualifying assets where applicable. Plus, the specialist will also apply all industry-specific legislation to ensure commercial depreciation deductions are claimed to their full potential – and is done so, compliantly.

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