A quantity surveyor can help you squeeze every cent of your tax and depreciation benefits when holding your investment property.
It’s absolute mayhem on The New Block 2015 as the final countdown to auction day begins. The Blockheads have the back-breaking task of completing the second half of rooms for the communal apartment, rolling out the cafe’ concept of Mr Zen downstairs and decking out the 360-degree rooftop complete with a wellness centre and stacks of greenery.
The top three winners this week have their pick of auction order- the winning couple will get first choice, the couple that comes in second will get second choice, and so on. What’s more, the winner will also get to park their shiny new Suzuki in their garage to be sold with their apartment on auction day, which is a pretty major selling point.
While auction is on everyone’s mind, the penthouse renovates Dean and Shay invited their quantity surveyor over for a little rondevu.
After inspecting the fixtures and inclusions, the quantity surveyor estimated that a purchaser could expect $70,000 of tax deductions in the first year and a total of $300,000 in deductions from holding the property.
Using this drawcard to lure in a prospective investor, Dean and Shay will leverage this figure to portray the penthouse as a “gold mine”.
Find out how a quantity surveyor can help you prepare a depreciation schedule to maximise your cash return from your income-producing asset this financial year.
ALSO READ: How important is auction order?
ALSO READ: The Block post-auction sales results
What is tax depreciation?
As your property gets older and contents within it endure wear and tear, they depreciate in value. The Australian Taxation Office (ATO) allows investors to claim a tax deduction, or tax depreciation, on both the property as well as plant and equipment assets inside.
What is a tax depreciation schedule?
When a quantity surveyor issues an investor’s capital allowance and tax depreciation schedule it normally consists of the following elements:
- Capital works deduction. This deduction is available for the structural element of the building which normally includes fixed assets.
- Plant and equipment. For the plant and equipment deductions, these are available for removable assets of the home.
What is a quantity surveyor?
Commonly referred to as a “construction economist”, a quantity surveyor is a licensed professionals that estimate and monitor construction costs of a property. Working closely with architects, financial planners, engineers and accountants, they are typically involved with providing tax depreciation schedules and cost estimations to property owners.
How can a quantity surveyor help me?
A quantity surveyor can help you prepare your depreciation schedule which can maximise your cash return from your investment property. The surveyor will inspect your property, measure and document all depreciable items, estimate the construction costs of the property and determine the value of plant and equipment items such as appliances.
Once they have all this information, they will develop a report with a breakdown of the building allowance costs and plant and equipment item costs.
When the depreciation schedule is finished, you can hand it over to your accountant to complete your tax return.
How much can I claim under capital works allowance?
As mentioned above, capital works deduction refers to the property structure and items that are permanently fixed to the property.
For investment and other types of non-residential property, capital works deduction can be claimed at 2.5% or 4% of the property’s historical construction cost.
As a property investor how can I claim depreciation?
To claim depreciation on your investment property, you’ll need to consult a quantity surveyor to complete the comprehensive depreciation schedule which will be used to prepare your tax return.
Can’t I just use my accountant?
While your accountant can give you advice about tax depreciation, they cannot provide you with a depreciation schedule that is needed to claim your tax benefits. Only a quantity surveyor can issue the actual numbers that will form the basis of your tax return.
According to the ATO, if your investment property was built after 1985, you must hire a quantity surveyor to create a depreciation schedule.
What did The Block contestants decide to do with their winnings?
The winners from the first reveal of the communal apartment challenge had to make the executive decision to either use the cash to either lower their reserve or reinvest into their apartment to spruce it up for auction day.
Here's what they decided:
|Shay and Dean||$15,000 from reserve|
|Kingi and Caro||$10,000 from reserve|
|Luke and Ebony||$5,000 back into apartment|
The next episode of The New Block 2015 airs tonight, Wednesday November 18, at 7:30pm on Nine.Back to top