On most occasions, property investors are introduced to a Quantity Surveyor by their Accountant or a property professional.
While an Accountant or a property professional will explain that these professionals are the bee’s knees when it comes to providing depreciation advice, investors are often unsure of exactly what a Quantity Surveyor does.
Quantity Surveyors are one of a few professionals recognised by the Australian Taxation Office (ATO) to have the appropriate construction costing skills to calculate building costs for depreciation purposes. However, not all Quantity Surveyors are experts in depreciation. Some use their skills to ascertain the costs of building works prior to or during construction for feasibility purposes or cost management. Depreciation experts, on the other hand, use a very particular set of skills to ensure your tax depreciation claim is maximised.
What is tax depreciation?
As a building gets older, items wear out – they depreciate. The Australian Taxation Office (ATO) allows property owners to claim this depreciation as a deduction. Depreciation deductions can amount to thousands of dollars put back in an investors pocket each year.
When the time comes for an investor to select a Quantity Surveyor to complete their tax depreciation schedule, it is best to choose one who eats, sleeps, drinks and breathes depreciation.
‘So what quirky habits does a Quantity Surveyor who specialises in depreciation have’, you ask? Let’s take a look at what helps them to set your depreciation schedule apart from the rest.
A Quantity Surveyor has a passion for numbers
In order to prepare your tax depreciation schedule, a specialist Quantity Surveyor will put their passion for numbers to good use.
Specialist Quantity Surveyors assess the structure of any income producing property and the plant and equipment assets contained within to calculate their depreciable value.
Structures such as walls, floors, windows and roofs are able to be claimed as capital works deductions at a rate of 2.5 per cent per year over forty years for any property in which construction commenced after the 15th of September 1987.
This may sound easy, but calculating deductions for the structure of a property is never this simple. Often older properties have undergone renovations. So long as any work completed took place within dates legislated by the ATO, the owner will be entitled to claim depreciation deductions, even if the work was completed by a previous owner.
Learn more: Older properties and depreciation
Calculating depreciation for plant and equipment assets is also quite a complex task. There are over 1,500 depreciable plant and equipment assets recognised by the ATO and each of them have individual effective lives by which depreciation deductions are calculated. That’s a whole lot of numbers to consider without the help of an expert who has done years of study and research into the topic and has years of experience.
Needless to say, it is best to ask for the help of a trained expert. The ATO recognise Quantity Surveyors for a reason, so it makes sense to leave the number crunching up to a specialist.
Quantity Surveyors are obsessive compulsive about including every plant and equipment asset on your depreciation schedule
Specialist Quantity Surveyors have excellent attention to detail. A good one also won’t be satisfied with just an itemised list provided by the owner of the property. They will insist on completing a detailed site inspection of the property.
During a site inspection, they will put their ‘photography skills’ to the test, taking pictures of every depreciable asset located both inside and outside of the property.
Plant and equipment assets hide in even the most unlikely recesses of a property. They can be found on every pavement just waiting for the garbage man to dispose of the waste they contain, hanging from the rod of every shower, lurking down the back corner of the yard helping to store the lawnmower, or even have the ability to help control the room temperature.
Quantity Surveyors see it as their duty to hunt these objects down, keep a record of them and ensure every single one is listed on the depreciation schedule for the owner.
They also use their laser like focus to measure distances from wall to wall, floor to ceiling. When it comes to all things depreciable, no stone goes unturned. Not even your friendly garden gnome is safe.
Their best friends are Accountants and property professionals
Specialist Quantity Surveyors have a tight knit relationship with Accountants and property professionals. This friendship is mutual, as the work that these professionals do goes hand in hand with the work that a Quantity Surveyor will do.
Quantity Surveyors can help potential investors by providing tax depreciation estimates to their Real Estate Agent for any property they are considering for sale. They also liaise with Property Managers who help arrange site inspection times with tenants when the time comes to complete the depreciation schedule.
Once a comprehensive tax depreciation schedule has been completed, specialist Quantity Surveyors can send a copy to your Accountant or you can take it to them when completing your annual income tax assessment to find out what deductions are available to be claimed.
Accountant’s also can help you to claim deductions more regularly using methods such as Pay As You Go withholding variations, or to adjust the two previous financial year’s claims if deductions have not been claimed or maximised.
There are methods to their madness
Specialist Quantity Surveyors will use tactics such as immediate write-off and low-value pooling to help investors maximise the deductions they claim and get more back from the tax man.
An immediate write-off can be applied to any plant and equipment asset which costs $300 or less. Some might think ‘why bother claiming those smoke alarms, they’re only $25 each’, but believe us when we say, these types of objects truly do add up. The total value of any item eligible for an immediate write-off can be claimed in full in the first financial year. That’s money saved rather than money spent.
Some items also entitle their owner to increased deductions. A specialist Quantity Surveyor knows assets which have an opening value of $1,000 or less in their year of acquisition or a written down value of $1,000 or less after previous years claims have been made will entitle the owner to claim deductions at an increased rate. A depreciation rate of 18.75 per cent can be claimed in the first financial year and 37.5 per cent for each year afterwards for low-value pooled assets.
They are sticklers for rules
Quantity Surveyors like to play by the books. They work closely with the ATO and their professional industry associations to stay up to date on the latest depreciation legislation, current tax rulings and advice.
They actively follow ATO guidelines to ensure that their schedules outline the maximum legitimate deductions for investment property owners.
The work a specialist Quantity Surveyor does in completing a depreciation schedule also acts as a protective barrier for investors should an audit from the ATO occur. If the ATO question an investor’s claim, they will be armed ready with the evidence necessary to support their claims.
Specialist Quantity Surveyors are rare individuals who possess characteristics that undeniably will assist you to improve the deductions you claim from an investment property during tax time. They love to help you and are a friendly bunch of hard workers who’d love to take your enquiry. To speak with one of the experts from Australia’s leading provider of tax depreciation schedules, BMT Tax Depreciation, phone 1300 728 726 today.