Quantity surveyor depreciation schedule

What is the benefit of getting a depreciation schedule?

A tax depreciation schedule is an important taxation document for any investor in Australia with an investment property. A quantity surveyor is the professional best equipped to provide your schedule, and the ATO has even legislated the use of a qualified quantity surveyor when preparing a depreciation schedule.

The tax depreciation schedule will provide a list of all the deductions that are available for the property, as well as the estimated value of each deductible item.
This means that investors will be able to maximise the amount of tax deductions they are eligible for, thus reducing their taxable income.

By having a tax depreciation schedule in place, investors – and their accountants – will be able to accurately calculate their tax liability, allowing them to plan ahead and budget with confidence.
On top of this, a quantity surveyor’s report will generally also provide advice on the best way to maximise deductions in the future.

Why are depreciation reports important for investors?

It is important for Australian investors to have a tax depreciation schedule prepared as soon as possible for an investment property for two reasons;

• To improve your cash flow as soon as possible (can’t do it without the report)
• Leaving it too long will mean you’re blocked from claiming deductions for previous years (an ATO rule that was introduced around 10-years ago)

A quantity surveyor is a professional who specialises in calculating the deductions for capital works, plant and equipment that investors can claim for their investment property. These deductions can result in significant savings on their tax liability.

Tax depreciation reports prepared by a quantity surveyor will provide an accurate calculation of deductions available, as well as the tax depreciation schedule. The deductions can be claimed for expenses such as structural and capital works, plant and equipment, and other items, which can reduce the investor’s taxable income.

What is a Quantity Surveyor?

A quantity surveyor in Australia plays a vital role in the construction industry, especially when it comes to new construction and capital works. They are responsible for estimating the costs of a project, preparing cost plans, estimating re-construction costs for insurance valuations and producing tax depreciation reports for property investors.

Estimating

Quantity surveyors also play a large role in the estimating process. They review all bids from contractors and then provide an accurate estimate of the total cost of the project. Another aspect to their work is helping identify areas where costs can be reduced, such as by using alternative materials or labour.

Project Management

Quantity surveyors are also responsible for monitoring the progress of construction projects. This includes making sure that work is completed on time and to budget. They also provide advice on how to manage the risks associated with any project, such as changes in the scope of the project or unexpected delays.

Tax Depreciation Reporting

Finally, suitably qualified quantity surveyors are responsible for preparing tax depreciation reports. These reports provide information about the value of a project’s assets, which can help to reduce the amount of tax that is owed.

What is a Quantity Surveyor Report?

In Australia, the Australian Taxation Office (ATO) recognises the importance of a Quantity Surveyor’s report when claiming tax deductions for depreciation on an investment property.

The report provides an accurate evaluation of the depreciable assets within the property, including building structures, fixtures, and fittings.

A Quantity Surveyor carefully inspects the property, documenting all eligible depreciable items, their condition, and their effective life expectancy. The report includes a detailed breakdown of these assets, their individual costs, and their depreciation values over time.

This information is crucial for investors seeking to claim maximum tax deductions and optimize their cash flow.

By engaging a Quantity Surveyor and obtaining a comprehensive report, property investors in Australia can benefit from substantial tax savings.

The ATO recognises the credibility of these reports and considers them as strong evidence to support depreciation claims, ensuring investors can maximize their returns on investment properties while remaining compliant with tax regulations.

A surveyor’s report is broken down into two main categories.

The two categories of depreciation

• • Capital Allowance (known as Division 43)

Capital allowance, also known as Capital Works, Building Allowance and Special Building Write-off, is for all structural and permanent items within and on your investment property; like painting and landscaping. Typically these items are claimed at a flat 2.5% pa. But there are some exceptions to the rule

• • Plant and Equipment (known as Division 40)

  Plant and equipment is for all loose and semi-permanent items such as;
  Light shades, appliances, carpet, air conditioners, furniture and so on. The annual depreciation rate varies between items and is largely determined by the ATO. Some items will depreciate at 100% as an instant asset write-off. While others may depreciate over a very long time, like passenger lifts, at just 3.33% pa.

  Why do you need your property physically inspected by a qualified Quantity Surveyor?

  When you go to the trouble of having your investment property assessed for the tax deductions on offer, you want to ensure you’re squeezing every last cent of tax refunds, you’re legally entitled to, out of your property.

  To do this, there is only one way.

  That is only achieved by having your preferred quantity surveyor physically visit your property.
  Walk through all the rooms and around the grounds.
  Making note of any and all deductible items.

  This stage of the tax depreciation reporting process is crucial for two reasons;

  • 1. Because they will ensure you get the maximum deductions on offer
  • 2. You will be compliant with the current ATO taxation laws regarding property inspections

  Negatives to having your property inspected by a quantity surveyor

  The only negatives are time and money. That is, it will take around 10-days longer for the QS to produce your depreciation schedule and the initial cost of the report will be slightly more. Typically 40-50% as the QS will spend an additional 1-2hrs just commuting.

  But the pay-off is you will get more tax deductions, meaning bigger tax refunds. This will offset any additional cost outlay for the report many fold.

  If you have an investment property there are undoubtedly tax deductions available to you. All you need do is speak to your preferred quantity surveyor or a good accountant for personalised advice.

  To do this, simply get in touch with us and I’ll personally look over your property via my computer and give you an eyeball estimate of deductions.

  In the meantime, you may find value in reading my other articles or checking out the real world results my clients have been getting with their tax depreciation schedules.

  Another good resource for you is my tax depreciation HQ page where you’ll find even more information regarding how to save tax on your investment property.

  This article was written by William Callaghan A.A.I.Q.S.
  2nd generation Quantity Surveyor and founder of WRC Quantity Surveying

  Published May 2023