A Quantity Surveyor is a professional who specialises in construction cost management and is an essential ally for property investors looking to maximise their financial returns. They play a crucial role in preparing tax depreciation schedules, assessing construction costs, and ensuring compliance with Australian taxation laws, particularly under Division 40 and Division 43 of the ITAA 1997.
Under Division 40, Quantity Surveyors help investors claim depreciation on plant and equipment, while Division 43 deals with capital works deductions on the building structure. Many investors mistakenly believe they can handle these complex calculations on their own, but a Quantity Surveyor's expertise ensures that all eligible deductions are claimed, significantly improving cash flow.
To see how this plays out, consider a practical example of a 2009-built 2-bedroom apartment in Fortitude Valley, Brisbane, purchased for $650,000. By engaging a Quantity Surveyor, the investor can identify approximately $9,000 in depreciation deductions in the first year alone. At a 37% marginal tax rate, this reduces the investor's tax bill by $3,330 in that year, enhancing overall return on investment.
In our experience reviewing thousands of properties across Australia, we often find that investors overlook minor renovations or improvements that could be depreciated. Another common oversight is failing to update depreciation schedules after renovations, which can lead to missing out on thousands of dollars in deductions. Additionally, many investors are unaware of the changes in tax laws post-9 May 2017, which restrict depreciation claims on second-hand properties — a trap for the unwary.
The answer can differ depending on your situation. For instance, if you own a property through a Self-Managed Super Fund (SMSF), the tax implications and depreciation strategies may vary compared to individual ownership. Similarly, the rules differ for commercial properties, where both Division 40 and Division 43 deductions can still be claimed on second-hand assets. If your property was built before 1987, capital works deductions might not be applicable unless substantial renovations have been made.
Engaging a Chartered Quantity Surveyor and an accountant ensures that your depreciation schedule is optimised for your specific circumstances. While a Quantity Surveyor provides detailed assessments and reports, your accountant can integrate these into your broader tax strategy, ensuring compliance and maximising benefits.