If you’re a property investor, your accountant or real estate agent
may have suggested that you speak to a quantity surveyor. But who are they and what do they do?
Hey guys, I’m Kim, Business Development Manager at Duo Tax.
Most people think that quantity surveyors only play a small role in construction when they
actually play a significant part in managing construction costs and contract tenders.
Not only that, but they’re also one of the few professions
qualified to compile tax depreciation schedules for residential and commercial property investors.
If you’re anything like me, you’re always looking for ways to save that little bit more. So,
in this video, I am here to share how a quantity surveyor can help you do just that!
You ready? Let’s go!
Quantity surveyors can estimate and monitor construction costs at various stages of a
construction for a building. For example, during the feasibility stage, quantity surveyors can use
their knowledge of construction methods and costs to give advice on the most economical way forward.
And during the construction stages,
they manage progress payments and value any changes to the building.
So, besides construction costs, what they’re also commonly known for are tax depreciation schedules!
Quantity surveyors are valuable assets when maximising your
return on your property investment through depreciation deductions.
Depreciation is the wear and tear of your property and its fixtures and fittings. For
example, as soon as you start using your new aircon, it loses a percentage of its value
and each year it continues to lose value. So, in 5 years from now,
you can’t sell it for the same price you bought it for because it's not worth the same value anymore.
The same principle also applies to your property building too.
Now depreciation may not sound very exciting, but most first-time property
investors don’t realise it’s actually a really valuable tool for minimising tax.
That’s because the ATO lets you deduct the depreciation loss against the income generated
from your investment property. This means that you can claim depreciation as a tax-deduction expense.
To find out more about all the tax deductions you can claim, check out our video [POINT
UPWARDS] that covers 17 tax deductions you can claim on your investment property.
So you might be wondering how a quantity surveyor can help with depreciation.
Well, claiming depreciation involves identifying the value of a property
and all its fittings and fixtures. Quantity surveyors are some of the only professionals
qualified to assign value to your assets. Now it may seem easy to just assess the value
of things like your concrete, but there’s actually so much more to it.
For example, you may know that a square metre of concrete costs you $100,
but did you consider each component that makes up that square metre?
Quantity surveyors break down each component,
such as the cost of excavating the area, the sand underlay,
termite protection, the formwork to support the concrete pour, and all the finishing touches.
After inspecting your property, the quantity surveyor will draw up
a depreciation schedule that outlines the value of your Division 40 and Division 43 assets.
Division 43 refers to depreciation of building structures and Division 40
relates to the fixtures and fittings inside the building like carpets or air conditioning units.
The purpose of a depreciation schedule is to show how much your property has depreciated and how
much it will continue to depreciate. This will give you a clear idea of how much you can claim.
Lots of investors miss out on the opportunity to save thousands of dollars
every year because they don’t realise the cash flow benefits of getting a depreciation schedule.
So, let me share Lara’s story with you.
Lara bought her first investment property for $420,000 and decided to rent it out immediately.
Based on the report she received from her Quantity Surveyor at Duo Tax,
her property’s construction started in July 2001 and was finished by February 2002.
The estimated cost of construction was $280,000.
The depreciation schedule outlines that Lara can claim depreciation on the property at a
rate of 2.5% each year, and her property’s construction began after 15 September 1987.
So, by only having to cover the cost of the schedule,
Lara can claim a depreciation deduction of $7,000.
What’s even better is that she can continue claiming these deductions until
2041 as long as he still owns the property
and is being used to produce income, because a depreciation schedule is valid for 40 years!
Speaking with a quantity surveyor and ordering a depreciation schedule
can actually be worth so much more than they cost!
Not to mention the fact that the cost of the report is ALSO tax-deductible.
So, that's it , quantity surveyors in a nutshell.
I hope this video has helped you better understand what quantity surveyors do
and the benefits of having a depreciation schedule.
If you know any property investors that can benefit from this video, please tag them below!
Thanks for watching, I’m Kim Quach, see you next time!