As an accountant, your role is pivotal in guiding clients through complex financial landscapes. One area where your expertise can significantly enhance client outcomes is by knowing when to recommend a quantity surveyor. This decision can optimise tax positions, ensure compliance, and provide accurate financial forecasts.
Key Scenarios for Recommending a Quantity Surveyor
Quantity surveyors are essential when clients own investment properties, are developing property, or need detailed construction cost assessments. For investment properties, a quantity surveyor can prepare a tax depreciation schedule, maximising deductions under Division 40 (plant and equipment) and Division 43 (capital works) of the ITAA 1997. This is particularly important post-9 May 2017 changes, which affect claims on second-hand residential properties. For property developers, quantity surveyors provide cost planning and feasibility analysis, ensuring projects remain on budget. Additionally, they assist in calculating construction costs for insurance and asset management, and in preparing capital gains tax (CGT) cost base reports.
How This Works in Practice
Consider a client who owns a 2008-built 3-bedroom townhouse in Parramatta, Sydney, purchased for $850,000. By engaging a quantity surveyor to prepare a comprehensive depreciation schedule, the client can claim significant deductions. Assuming plant and equipment depreciation of $6,000 and capital works deductions of $10,000 annually, at a 37% marginal tax rate, this results in a tax saving of $5,920 for the first year alone.
Professional Insight
In our experience, recommending a quantity surveyor is often overlooked until after property purchase, missing early tax planning opportunities. One thing we frequently see is clients underestimating the value of depreciation on older properties, especially when extensive renovations have been completed. Many investors are unaware that quantity surveyors can also assist with CGT cost base adjustments, significantly impacting the net profit on property sales. Additionally, for clients involved in property development, early engagement with a quantity surveyor can prevent budget overruns and ensure project viability.
When Does the Answer Change?
- Post-9 May 2017 Acquisitions: For residential properties acquired after this date, second-hand plant and equipment deductions are restricted.
- Pre-1987 Buildings: Properties built before this year may have different eligibility for Division 43 deductions unless substantial renovations have occurred.
- Commercial Properties: Different rules apply for plant and equipment depreciation, often yielding higher deductions.
- Properties in an SMSF: Specific compliance requirements necessitate careful planning with a quantity surveyor.
When Should You Seek Professional Advice?
Complexities in depreciation schedules, CGT calculations, and construction cost estimates often require tailored advice. Engaging a Chartered Quantity Surveyor ensures accurate assessments and compliance with tax laws. Collaborating with an accountant allows for a comprehensive financial strategy, especially when dealing with multi-property portfolios or large-scale developments.