You've spent a lot of cash building your property portfolio, so you want to make sure it's giving you the best returns possible.
Blogger: Tyron Hyde, director, Washington Brown
Buying and settling on an investment property is a lengthy process, and for good reason. It ensures procedures are followed and regulations are met before you are fully committed financially.
And let’s face it, you’re spending a serious amount of money on something you ultimately expect to make money on, so proper due diligence is paramount.
But what about the process you go through to purchase your tax depreciation schedule? While the cost may be a fraction of what you paid for your property, failure to obtain a thorough report is likely to cost you thousands in lost tax deductions.
Follow these steps to ensure you’re maximising every cent and avoiding unnecessary interest from the Tax Office.
STEP ONE: You need a quantity surveyor, not an accountant
If your residential property was built after 1985, your accountant is not allowed to estimate the construction costs. Neither is a real estate agent, property manager or valuer. While accountants can offer advice around other aspects of tax depreciation, construction costs and property depreciation are highly technical domains.
You need a quantity surveyor to give you a report estimating these construction costs. I also recommend you make sure your depreciation provider is a member of the Australian Institute of Quantity Surveyors (AIQS) – you can verify this by searching for the firm at www.aiqs.com.au
Remember, your quantity surveyor must also be a registered tax agent.
STEP TWO: Use an experienced quantity surveyor
You have just paid hundreds of thousands of dollars for a property. Do you really want to save a couple of hundred tax-deductible dollars on your only tax break open to interpretation?
Talk to your quantity surveyor about the degree of expertise they have in depreciation. How long have they been producing reports and how often do they do so? Laws have changed frequently over the years and each building is unique, so it pays to get advice.
I suggest you engage a firm that has been around for at least 10 years. They will have the experience to analyse your property correctly. Don’t fall into the trap of assuming anyone involved in the project can accurately estimate construction costs. Experienced quantity surveyors are experts at estimating construction costs. That’s what we do on a daily basis, whether it is for a property developer, a property financier or a builder.