When it comes to managing your investment property, a Quantity Surveyor report is essential for maximising your tax depreciation claims. But can you claim the cost of obtaining this report as a tax deduction? The short answer is yes. The ATO allows the cost of a Quantity Surveyor report to be deducted if it is incurred in the course of earning rental income or in the preparation of your tax return.
Under ATO's guidelines, expenses that are directly related to earning assessable income are generally deductible. This includes professional fees paid to Quantity Surveyors for preparing a tax depreciation schedule. Many investors overlook this deduction, mistakenly viewing it as a capital expense. However, because the report is used to establish ongoing deductions for depreciation, it qualifies as an immediate deduction in the year incurred.
To see how this plays out, consider a practical example. Imagine you own a 2009-built 2-bedroom apartment in Fortitude Valley, Brisbane, purchased for $750,000. You engage a Quantity Surveyor to prepare a depreciation schedule, costing $600. This report enables you to claim $10,000 in depreciation deductions annually. Deducting the $600 cost of the report immediately reduces your taxable income, which, at a 37% marginal tax rate, decreases your tax bill by $222 in the first year.
In our experience reviewing thousands of properties across Australia, we find that many investors miss claiming the cost of the Quantity Surveyor report as a tax deduction. Others wait too long to obtain a depreciation schedule, losing out on potential deductions. Some investors mistakenly believe they can only claim the report's cost if they also claim depreciation in the same year, which is not the case. Additionally, failing to update the schedule after significant renovations can lead to inaccurate claims.
The answer can differ depending on your situation. If you purchased a second-hand residential property post-9 May 2017, you're restricted from claiming depreciation on pre-existing plant and equipment, but you can still claim the report's cost. For properties owned by a company or held in a self-managed super fund (SMSF), the tax implications might vary, and professional advice is recommended. If the property is jointly owned, each owner can claim their share of the report's cost. Commercial properties have different depreciation rules, but the report cost is still deductible.
The aspects of claiming a Quantity Surveyor report that depend on individual circumstances include how the property is used, ownership structures, and whether the property is producing income. Engaging both a Chartered Quantity Surveyor and an accountant ensures you maximise your tax benefits, as the QS provides accurate depreciation figures and the accountant integrates these into your tax strategy.
Here are your next steps: