Who does Depreciation Schedules?

who-issues-or-makes-depreciation-reportsHaving been in this industry for more than two decades now, I’ve met all sorts of property developers and investors. Many of the calls and inquiries I receive are from frustrated investors who could not get depreciation reports (or schedules) from their accountants or real estate agents. However, what most investors don’t know, is that there is an ethical and practical reason behind this method.

Depreciation Laws

The main reason accountants and real estate agents are not qualified to create these reports boils down to one issue. Essentially, if your residential property was built after 1985 your accountant is not legally allowed to estimate the construction costs. It is important to note that the Tax Ruling 97/25, issued by the Australian Taxation Office (ATO) has identified quantity surveyors as properly qualified to make the appropriate estimate of the construction costs, where those costs are unknown.

Qualified Quantity Surveyors

Based on this ruling, this means accountants can offer advice around other aspects of tax depreciation. But construction costs and property depreciation are highly Depreciation Calculatortechnical domains and must be calculated or estimated by qualified quantity surveyors in order for the report to be legally acceptable.

In nearly all cases, you will gain a larger benefit using a quantity surveyor to prepare your depreciation schedule. This is simple due to the fact that the quantity surveyor will physically visit the property. This can only be of benefit to you, the property investor, as the quantity surveyor will discover items that can only be seen from a visit to the property, and could have otherwise been missed and left out of the report.

Work out how much you save using our free property depreciation calculator or make it happen and get a free quote for a depreciation schedule now.

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Can I DIY my own Depreciation Report?

As an expert in the market I am baffled by the number of companies that offer do-it-yourself depreciation schedules. Not only are there some potential legal issues but, more importantly, you will be missing out on deductions.

The Issue with DIY Depreciation

The DIY depreciation option generally gives you a tick sheet and asks you to take your own measurements of rooms and other parts of the property.

DIY depreciationNow, let’s say you measure from one bedroom wall to the other. If you do that all around the house you could reduce the property by 10% in gross area. At around $1,500 per square metre to build, you would have missed out on something like $15,000 worth of tax deductions.

When a client comes to us needing a depreciation report, we will send out a quantity surveyor to do a thorough site inspection. This involves a measurement of all the rooms and areas in the property (allowing for wall widths and other anomalies) and all the plant and equipment items including carpets, blinds, ovens and air conditioners.

It is a thorough process and you should use technically qualified people to do it.

The Australian Institute of Quantity Surveyors’ (AIQS) Code of Practice also stipulates that site inspections are necessary to satisfy ATO requirements. This guarantees you won’t miss out on any deductions. The documentation can then be used as evidence in the event of an audit.

Depreciation CalculatorThe AIQS also points out that those property owners who attempt to estimate their own depreciation, or use non quantity surveying qualified people, risk submitting an incomplete or poor depreciation report, which could be a double whammy. It could not only cost them in missed deductions but could also possibly attract an audit by the ATO if their report is not up to the standard required.

Work out how much you save using our free property depreciation calculator or make it happen and get a free quote for a depreciation schedule now.

This blog is an extract from CLAIM IT! – grab your copy now!