Quantity Surveying is a vital cog in the wheel of every serious Property Investor.

Here at Real Property Matters, when we speak to Investors about their properties we often hear… “Oh, I leave it all up to my Accountant.” Sounds familiar, doesn’t it?

But although Accountants are a valuable tool for investors, there is a very essential area of property investing where only one type of professional can help – and that is the area of your Depreciation Claims.

Under current legislation, the ATO lets you claim loss of value to certain items through an allowance for depreciation. This compensates the investor for the wear and tear over the years of owning the property.

Enter, the Quantity Surveyor.

The cornerstone of all depreciation claims is the ATO Capital Works Deduction.

Capital Works items are the building itself (e.g. walls, roof & floor) and all the permanent fixtures attached to the property, e.g. pergola, swimming pool, fencing & retaining walls, to name just a few.

“Capital Works are the cornerstone of depreciation”

A Quantity Surveyor is an experienced professional who works with construction costs daily, and therefore understands the complexity involved in correctly establishing the cost of these items – and helping you claim the most you possibly can from your investment.

They establish –

  1. How old the construction is (if not known)
  2.  An estimated construction cost of the structure

From that point, they can then adjust the construction cost to reflect the time since the construction.

How does that help you?

Let’s look at an example…

March 2017 a Property Investor bought a house built in 2005 for $595,000.

The purchase price (or market value) when considering Depreciation becomes irrelevant instantly. In 2017, that property would have cost near $325,000 to construct. What the property cost originally to build in 2005 is the key, and what you need to determine.

A professional and experienced Quantity Surveyor can establish this and in this case, a conservative estimate would be near $210,000.  This figure is the cost the ATO allows you to depreciate.

Once the original construction cost has been established, that amount will depreciate over a 40-year period at a rate of 2.5% per annum.

Establishing Construction Cost is a specialised field and under ATO legislation; Accountants, Real Estate Agents & Property Valuers are NOT qualified to establish this construction cost.

Only a Quantity Surveyor is recognised by the ATO to do this – which is why using an experienced Surveyor is crucial for Australian Property Investors.

Refer to the table below for an indication of the type of savings that could be achieved through correctly depreciating this 2005 built house;

Year Construction Cost Depreciation Claim
Part Year 2017 $210,000 $1750
2018 $210,000 $5250
2019 $210,000 $5250
2020 $210,000 $5250
2021 $210,000 $5250

 

A property built in 2005 and used as an investment property from March 2017 could attract $147,000 in depreciation claims over the life of the build. Those are massive, potentially un-tapped savings for thousands of Australian investors.

So, there you have it – Why Quantity Surveying is vital for Property Investors.

If you need an expert Quantity Surveyor or have any other questions, please give us a call – we are happy to help.