The property sphere is filled with specialists who can help maximise the financial outcomes from your real estate portfolio.
From solicitors to building inspectors and accountants to mortgage brokers, there are many smart minds eager to guide you across all the challenges of investment.
Most buyers know about the key advisors, but there is one profession that rarely gets the recognition it deserves. Their special power is to ensure you can take full advantage of your investment, with the result being thousands of dollars back in your pocket each year.
I’m talking about the QS, or quantity surveyor
What is a QS?
A QS is an independent construction professional with specialist knowledge on calculating and estimating construction costs.
They are the perfect ‘go to’ for services such as preparing budgets and feasibilities for projects, or analysing tenders and quotes for construction. Their skills allow clients to operate with confidence and negotiate from a position of knowledge.
But for the everyday property punter, there is one particular benefit to having a QS on board that can see you holding even more dollars in the annual budget – tax depreciation.
The tax advantage
Anyone who invests in property and does not utilise a QS prepared depreciation report is doing themselves an extraordinary disservice.
Depreciation refers to how much the various materials, fittings and fixtures within your investment fall in value over time.
So that fabulous kitchen you just installed in your renovation project might look the business now, but wear and tear will take their toll and its value will reduce over the years. Fortunately, tax laws allow you, within certain guidelines, to deduct that loss against your income.
This means your tax bill each year is reduced and often, for those on PAYE schemes in particular, there’s a nice little bonus in terms of a higher tax return.
The QS advantage
A QS is invaluable in this process for a variety of reasons.
Firstly, they’re trained to identify the different types of improvements you can claim depreciation against.
A QS will do a comprehensive inspection of the investment to identify and categorise each item for depreciation in their report.
They identify Capital Works (i.e. construction works or non-removable fixtures and fittings) or Plant and Equipment (i.e. items that aren’t capital works and depreciate faster than the building, such as kitchen appliances).
There an important reason for this distinction. Different laws apply as to the level of depreciation that can be applied, and the rate at which it can be claimed.
There an important reason for this distinction. Different laws apply as to the level of depreciation that can be applied, and the rate at which it can be claimed.
The rules can even be influenced by how much you spend on an item. For example, ceiling fans under $300 can be claimed in full straight away, while an air conditioner’s depreciation is claimed over a number of years.
This is why the QS is so important. The rules around tax are a complex jungle that is ever changing. They are subject to the whims of political influence, which means if you aren’t constantly across the relevant legislation, you will either miss out on a major deprecation item or, worse still, claim in error.
Finally, the QS will set all of this out in a report that can be handed directly to your accountant – no mess, no fuss. You simply reap the rewards of their vast knowledge.
And the report is relevant for 40 years – far and away longer than most people will hold an investment for.
Is it worth it
Having a QS prepare your investment’s depreciation report is worth every penny.
Reports cost between $400 and $800 in most cases, and the tax return boost often means this fee is paid back to you the first year its applied.
The cost of a depreciation schedule is also 100 per cent tax deductible.
And don’t worry if your investment isn’t brand new. Even older properties have depreciable items within their walls. Anytime works have been carried out in a home, there’s a reasonable chance to depreciate something.
So, if you aren’t using a QS, why wait. QS Participation in your property investment is one of the most immediate cost-to-benefit outcomes of any service in the property investment journey.
And who among us doesn’t enjoy getting a little something extra from the ATO each year?
The information provided in this article is general in nature and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information you should consider the appropriateness of the information with regard to your objectives, financial situation and needs.
with clients all over Australia and around the world. Andrew has over 30 year’s experience in the finance industry and has assisted clients to secure over $2 Billion in mortgage lending over his time. Intuitive Finance deals with all aspects of lending from helping first homebuyers, someone wanting to upgrade their home or starting out and experienced investors looking to secure that next investment property, we can assist with all those requirements. We also specialise in working with self-employed clients and getting them the best outcomes, along with Commercial and Asset finance solutions. Intuitive Finance is highly regarded in the industry and has been recognised as a national winner of the MFAA customer service award and also one of the finance industry’s top mortgage employers. Our brokers also feature regularly in the Top 100 mortgage brokers list in Australia.
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