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Proposed Tax Changes Place Investment at Risk

The accommodation industry has warned that proposed changes to Australia’s taxation system will jeopardise investment in new hotel developments and refurbishment of existing accommodation businesses.

The warning is contained in the Accommodation Association of Australia’s submission to the Business Tax Working Group, which has proposed reducing the rate of depreciation for buildings or eliminating it altogether. The Accommodation Association’s submission states: “Tax deductions for building depreciation is a critical factor for investors, including developers, when they are evaluating whether to incur construction expenditure on accommodation businesses.

“Reducing the rate of depreciation or even eliminating building depreciation would result in significant additional tax costs for our industry. All of the building depreciation options which have been put forward would constrain future investment in hotel construction and refurbishment.”

The Association’s Chief Executive Officer, Richard Munro, said that if the proposed changes become a reality, Australia’s tourism accommodation product will suffer. “There are direct links between the number of rooms, the standard of Australia’s accommodation offering and the level of investment in it,” Mr Munro said. “Taxation changes such as those which have been proposed by the Business Tax Working Group will jeopardise investment and place at risk the stretch goal in the ‘2020 Tourism Industry Potential’ blueprint of 40,000-70,000 new accommodation rooms in Australia by 2020.

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