TAX DEPRECIATION

“We certify that JR Quantity Surveyors are appropriately qualified under the Australian Tax Office rulings to undertake an assessment of building costs to be used in the preparation of property tax depreciation schedules. The Principal and its associates are Associate Member of the Australian Institute of Quantity Surveyors (AAIQS)”

JR Quantity Surveyors (JR-QS) is a specialist in the field of property tax depreciation. The Principal has approx 20 years working experiences in building and construction industry, with expertises in residential & luxury houses, low and high-rise strata unit, industrial building, commercial and retail buildings.

Property tax depreciation matters are complex in nature with ATO constantly changing or updating their interpretations and tax rulings on depreciation. Thus, JR-QS would recommend property investors to engage appropriately qualified and experienced quantity surveyors to prepare their property tax depreciation schedules to avoid the risk of non compliance.

JR-QS constantly monitors the directives issued by the ATO with regards to property tax depreciation matters to ensure compliance and maximisation of tax deduction available to our clients.

To date, ATO has listed more than 1000 depreciable items, including rulings of which items in a rental property can be claimed as depreciating assets. We understand these rulings are not negotiable and to apply from 1st July 2004.

JR-QS guarantees saving on our fee in the first year – or there will be charge for our services ……………..

Our services to Builders, Developers and Real Estate Marketing Agent

JR-QS provides tax depreciation consulting services to developers and real estates marketing agents for their marketing and sale purposes.

JR-QS can assist in preparing initial indicative tax depreciation estimates that outlines the potential tax depreciation benefits available from a given residential, commercial, retail or industrial property.

Developers & real estates marketing agents can use these indicative tax depreciation estimates to inform potential investors of the available deductions in a particular development.

JR-QS believe these estimates would provide the vendor agents with extra marketing advantages.

Our services to Property Owner or Investor

JR-QS undertakes to carry out a thorough on site inspection to ensure maximum possible deduction while still being ATO compliant, and at a very competitive fee. Our services include:

  • Liase with your accountants regarding your tax depreciation matters
  • Site inspection, measure and photograph (where required) property for tax audit purpose by an experience and qualified quantity surveyors
  • Examine relevant strata plans or architectural plans
  • Council and regulatory authority searches (exclude searches fees)
  • A detail report with complete breakdown of up to 10 years to suit your tax requirement
  • A typical full report up to 40 years deductions in both prime and diminishing method (including low value pooling)
  • Capital Works (Div 43) allowance

To date, JR-QS has prepared numerous property tax depreciation reports on a wide variety of properties including but not limiting to:

  • Free standing residential houses including luxury houses
  • Semi detached and townhouses
  • Low rise apartment s
  • High rise apartments
  • Prestige or high standard apartments
  • Commercial, office and retail buildings
  • Industrial and warehouse buildings

CAPITAL ALLOWANCES SCHEDULE – DEDUCTIONS FOR CAPITAL WORKS

This table summarised the relevant date of construction and annual prime cost % rates available to obtain deduction for the various type of construction.

TAX DEPRECIATION – FAQ

Why choose JR-QS?

JR-QS experiences in building construction and knowledge of tax depreciation matters would ensure maximum benefit to our clients.

All site inspection is conducted by highly qualified and experienced quantity surveyors of more than 10 years working experiences to ensure all depreciable assets are identified.

Unlike many other firms, JRQS does not sub contract site inspection work or utilise non AAIQS members to carry out site inspection. All site inspections will be conducted by in-house quantity surveyors who are an associate member of the Australian Institute of Quantity Surveyors.

JR-QS photograph (where required) the property for audit purposes. All properties will be inspected; in exceptional are new developments where units are similar or typical.

Our fee is highly competitive and our depreciation report is in a detail format to suit your accounting and tax requirements.

Is my property (built prior to 1985) too old to claim for depreciation deduction?

No, all properties are entitled to some form of depreciation regardless of its age i.e. even if your building was built prior to 1985.

No building allowance is available for residential building constructed before 18th July 1985 or 21 August 1979 for hotel style accommodation and 20/7/82 for non residential building.

However, there will be some form of depreciation available to the depreciable assets of the property.

Structural improvement carried out after 27/2/1992 is entitled to some form of depreciation and capital works deductions respectively.

Please contact JR-QS for more information. JR-QS provides an obligation free searches and advice. There will be no service charge (except for council and other searches fees, where applicable) for this advice.

Can I backdate my depreciation deduction claim?

Yes, a depreciation report can be prepared to allow an individual to easily recover missing depreciation benefits (up to a period of 2 – 4 years) by amending previous tax return. Your tax adviser should be able to advise you further on this matter.

How does claiming depreciation on my rental property be beneficial to my investment?

Claiming depreciation offset your total taxable income, and reduces the tax you have to pay in today dollars. This will “free up” your cash flow and enable you to repay your mortgage or debt in a shorter duration.

What is the effect of claiming depreciation on my rental property on capital gains tax?

Claiming capital works deduction increase your capital gain tax liability upon realisation of your property. However, claiming deductions on depreciable assets do not have any effect on the capital gain.

The good new is that there is a significant “dollar” value in the depreciable assets deduction, especially in the first 5 years, which all property investors should take advantage of.

How do we differentiate if the repair works to my rental property is of capital works nature or deductible under sub-division 25-10?

The distinction is between repairs and improvement. Improvement is dealt as capital works, whereas repairs are dealt with as a normal outgoing expense.

Restoration of a leased premise upon vacation by the previous tenant is capital expenditure.

All maintenance or repair works carried out during leasing period need to be examining on case by case basis by our surveyor i.e. if the works are of repairs or improvement nature.

My client own 5 apartments in a complex. Can we consider the 4% deduction for capital works?

No. With hotel, motels and guesthouse, the taxpayer can claim the 4% rate. With apartments and units, the taxpayer must own 10 or more in the same complex before they can use the 4%.

Am I entitled to claim deduction on any items in common areas?

Yes, in fact a large portion of tax benefit relates to the common areas.

Unlike some firms, JR-QS conducts mandatory inspection of all properties especially the common areas in an apartment or high-rise block of units. e.g. of depreciable items in common areas include but not limited to FHR, Fire Extinguisher, EWIS, Auto Access Control, Sump Pump, CCTV, Smoke Detection & Alarm System, Hydrant Pump, Pool/Spa Equipment, Gym Fitout and Equipment, MATV, etc. etc. etc.

Is it recommended to engage a QS firm to prepare my tax depreciation schedule online, by furnishing them the information required and without inspecting my property?

The answer is “No”, for a numbers of reasons highlighted below:

  1. First, this unprofessional practise is not recommended and is discouraged by the Australian Institute of Quantity Surveyors and the tax office.
  2. There is question of “who bear the risk?” in the event of an audit by ATO; as in this case you are also a party in the preparation of the tax depreciation schedule. Wouldn’t it be better for you to leave it to the “professional QS” to take the whole responsibility, as they are cover by their indemnity insurance whereas you are not?
  3. For a minimum saving in fee, you may actually end up losing more. Unless you have building construction and tax depreciation knowledge, otherwise you are probably not in the best position to identify all depreciable assets, especially in the common areas (see Q. 8 above). Without site inspection, it is difficult to place a dollar value on the depreciable assets and to ensure maximum benefits are available to you.
  4. No firm should claim that they can prepare a comprehensive tax depreciation report without inspecting the property. Remember, our fee are tax deductible so real difference in fee is minimal

With respect to depreciation, is there any different between a passive investor and a company obtaining income from rental property?

Yes, investor who is unable to ‘show a business’ cannot claim depreciating assets based on common law principals, but is only able to use the definitions of “plant” – articles/machinery!!

11. Can JR-QS prepare a tax depreciation schedules for my property in another states?
Yes, we have associate offices in Victoria, Queensland and Western Australia.

Short Term Traveller Accommodation<Non residential Income Producing Building

Type of Construction Start Date Rate % Years
Short Term Traveller Accommodation

22/8/79 - 21/8/84 2.5 40
22/8/84 - 17/7/85 4 25
18/7/85 - 15/9/87 4 25
16/9/87 - 26/2/92 2.5 40
27/2/92 - 4 25
Building used for eligible Industrial activities

27/2/92 - 4 25
Non residential Income Producing Building

20/7/82 - 21/8/84 2.5 40
22/8/84 - 15/9/87 4 25
16/9/87 - 2.5 40
Residential Income Producing Building

18/7/85 - 15/9/87 4 25
16/9/87 - 2.5 40
Income Producing Structural Improvement

27/2/92 - 2.5 40
LIST OF SOME OF THE COMMON RESIDENTIAL RENTAL ASSET EFFECTIVE LIFES
- For Assets Acquired from 1st July 2004
Carpet

10 Dishwasher

10
Floating Timber Floor

15 Microwave

10
Linoleum or vinyl

10 Fire Extinguisher

15
Furniture, freestanding

13 1/3 CCTV - Camera/Monitor

4
Garbage bin

10 CCTV - Digital Recorder

4
Garbage Compacting System

6 2/3 Pool - chlorinator/filtration

12
Generator

20 Pool - heating (gas/Electric)

15
Gym Asset - Cardiovascular

5 Pool - Cleaning

7
Gym Asset - Resistance

10 Sauna Heating Asset

15
Hand dryer

10 Spa Bath - Pump

20
Heater - electric

15 Spa (fixed) chorinator/filtration

12
Heater - ducted central heating unit

20 Spa (fixed) - Heater (gas/Electric)

15
Hot Water Installation - electric and gas

12 Garden Watering - Control Panel/pump/timer

5
Intercom Assets

10 Auto Garage Door - Motor

10
Light fittings (excluding hardwired)

5 Auto Garage Door - Control

5
MATV Assets - Amplifiers, Modulators, Power Sources

10 Air Cond - AHU

20
Mirrors - freestanding

15 Air Cond - Condensing Set

15
Rugs

7 Air Cond - Cooling Tower

15
Ventilation fan

20 Air Cond - Chiller Absorption

25
Water Pumps

20 Air Cond - Chiller Centrifugal

20
Window Blind - Internal

10 Air Cond - Room Unit

10
Window Curtain

6 Air Cond - Packaged Unit

15
Window Shutters Control and Motors

10 Air Cond - Mini Split Unit up to 20 KW

10
Exhaust Fan

10 Air Cond - pump

20
Heated Towel rail

10 Operable Pergola - Control

15
EWIS Assets

12 Operable Pergola - Motor

15
Fire Alarm - heat/smoke

6 Dish Washing Machine

10
Fire Detection/Alarm System

12 Kitchen Cooktop, Oven, Rangehood, Stoves, Refrigerator

12
Fire Indicator Panel

12 Clothes Dryer

10
Fire Hose and Nozzles

10 Clothes Washing Machine

10
Escalator

20 Lift - Electric/Hydraulic

30

Tax Depreciation Online Application Form

Note - This is for online application. It is not mandatory for all fields to be complete before sending through except for Name, Email, Tel, Property Address

Client Name

Postal Address

Phone Number

Email

Property Address

Site Access Contact / Managing Agent

Purchase Price

Settlement Date

Land Value (if known)

Building Completion Date

Building Construction Cost (Owner Builder)

Accountant/Referral

Improvement: Please state any refurbishment/renovation works and date of completion carried out after acquisition of property

Improvement: Please state any known refurbishment/renovation works and date of completion carried out by previous owner