BMT compared to other tax depreciation companies

Hi all,

I have been using BMT for tax depreciation schedules but just wanted to ask if it’s worth getting BMT for my upcoming investment property that I am purchasing for $127,500 in NSW regional area. The property is around 20 years old and has had several fixtures added in while being rented including an oven, aircon, and am purchasing it furnished so not sure if that will be included in the report such as the tv, furniture etc.

If it is worth getting a depreciation schedule would it still be worth going through BMT who charge around 750$ compared to others who charge around $300. If so please let me know what does BMT provide in this case that would still be worth while going through them.

 

Ask them @BMT Tax Depreciation - changes to depreciation over recent years may mean there are fewer depreciable items.

 

I have seen three instances of a QS report from two providers for the same property. With measurable variance in the amounts deductible. Generally through errors. In each case BMT was involved. In each case there were defects in the QS report prepared by others (2 different firms). In each of the three the final report was from BMT and it was a higher deductible as they included all costs where the others did not. I cant share the comparisons for legal reasons. It would disparage two QS firms.

Anyone who charges $300 isnt providing a complete service. That said, I have had clients charged a low fee by BMT where they did the developer construction estimates. They then just needed details on the interior fitout to complete the client schedule. And it was BMT who told the clients in that situation that they already had the data and so the cost would be less.

The existing plant items wont be eleigible for Div 40 initially but will have a value for CGT write off in future years. Div43 would still be applicable to the build. BMT and other QS firms should be able to indicate estimated anual deductions to determine the life value of the QS report.

 

This is a good and fair question and I'll try to answer it without making a sales pitch!

The first point I'd like to make is a forest-for-the-trees thing that I bring up with almost everyone I talk to: people tend to lose sight of the fact that, when they're comparing depreciation schedule providers, what they're shopping for is tax deductions. So, whichever provider you're speaking to, ask them how many deductions they estimate you'll get per year, given the information at hand. Yes, we generally have higher fees, but the fee is a one-off, whereas the resulting deductions could be a marriage lasting forty years.

Estimates are of course only educated guesses until we view a property, but I stress the word "educated", and any provider should be able to give you a figure with some degree of accuracy. So, if we estimate in a window of yearly deductions that's higher than another provider's and the fee difference is one or two hundred dollars, I can easily make an argument that the higher cost will likely quickly pay for itself. If our estimate is comparable, I have my work cut out for me. Now, your fee difference is significantly more than that, which leads me to ...

... the second point I'd like to make, which is that a $300 fee will not include an inspection, and the latter is a must. There is no way that a provider can make an accurate assessment of a property and its subsequent works and maximise the deductions (as opposed to using conservative figures that anyone could justify and will likely fly under the radar) without an inspection. It's not just us saying that--our governing body, the AIQS, demands it for compliance. I've linked to their most recent statement below, and you'll see that it doesn't necessarily just apply to depreciation in the time of COVID-19.

COVID-19 and Tax Depreciation Inspections - AIQS

Whatever you do, make sure an inspection is part of the package.

If you want to message me your quote's reference number or the property's address, I'll look into this from my end and see what I can come up with.

 

@BMT Tax Depreciation I need two reports updated, do I pm you?

 

Indeed you may! Or else ask for Chris on 1300 728 726 or email me directly at [email protected]

Please include some details that will help me track you down in our database--we don't yet have a field for online handles!

 

As BMT has stated, you should really check what is included in the fee of $300 compared to a $750 report. A $300 report will have no inspection included, also highly likely, no quantity surveyor prepares the report, it will be done by a depreciation calculator using conservative figures. So your return will be quite low, compared to a report prepared by a qualified quantity surveyor who does an inspection of the property.
Although I think $700+ for a report is quite high, using a local quantity surveying firm (local to where your investment property is located), will get you in the sweet spot for fee of $450-600, as their overheads wouldn't be as high as big firm.
Have seen that a lot of firms have a fee for the level of service they provide, usually a bronze to gold package, I would assume the more you spend the better returns you will get (you would hope anyway!!).

 

I see a variety of reports. I havent seen any for $300. IMO thats way too low to reflect quality. Its like buying discounted prawns or chicken discounted to clear. Surely they cant be that bad ?

I would have doubts about the quality when a QS doesnt even attend the property and charges this very low fee. Is it one of those 5-10 year specials that seem to just stop after 5 years ? BMT have a fee guarantee that could see the fee dropped. Did you mention PC ?

 

There are plenty of the $300 reports out there, one company who have been mentioned in these forums as a quality depreciation company have even offered it for $200.

 

Hi Chris

I hope that both you and BMT are doing well..

I thought I’d write to you to mention my concerns and disagreement with your recent quote detailed below:

The AIQS does not demand it [an inspection] for compliance. Not only do they not, but it also is not their job to make such demands.

In fact, Grant Worner the CEO of the AIQS, has confirmed the following in writing:

"I would like to confirm that AIQS (or the legal advice we sought) makes no representations about:

· How tax depreciation reports must be prepared by Quantity Surveyors;

· What Quantity Surveyors are able to estimate;

· Whether original or newly appointed Quantity Surveyors are best equipped to estimate certain construction costs; or

· Physical inspections being necessary to complete a tax depreciation report."

The AIQS, as you know, represent many firms, not just tax depreciation specialists.

I approached the AIQS for clarity on the situation because of inaccurate and misleading statements like this:

Firstly, as you know, legislation has drastically changed and we can no longer depreciate “previously used” assets.

Secondly, our role, and only EVER our role, according to TR97/25 is to provide an estimate of the DIV 43 deductions where the costs are unknown.

I felt that stating that you have to inspect a property in order to provide an accurate estimate of the Div 43 is incorrect.

Let's take the following example - I work for XYZ QS firm. I worked on the project during the design phase, did the quantities, then I was instructed by the bank to be the QS on the project and finally complete the variation register.

XYZ has all the design docs and as close to the actual costs as possible.

The developer sells a unit off the plan and that unitholder sells it after 6 months.

All the video and photos are online and in RpData at the time of the subsequent sale.

Are you telling me that by sending someone with ‘on the job training’ out to inspect, you can provide a more accurate estimate of the original costs than the original QS who worked on the project for 2 years?

Are you telling me that you can provide a more accurate estimate, that will stand the test of any audit, where Washington Brown or another firm has the actual costs, plans and specs?

This not only goes for me - but for all the QS firms who have worked on the project over many years.

Suggested reading on this topic: Depreciation Schedules The New Reality

I’m curious what are your qualifications and AIQS grade that enable you to make comments on how other firms should calculate capital works deductions?

Regards

Tyron Hyde, FAIQS

 

Hello Tyron,

Thank you, and likewise. Good to see that the ripples from my post in September have reached you.

I will concede that “demand” was too strong a word to use. However, the statement I linked to above (which is still online) contains the following quote:

“Where homeowners/occupiers choose to not allow a quantity surveyor to enter their home this may impact the ability of the quantity surveyor to provide an accurate and timely Tax Depreciation Report. This could mean that the homeowner does not have the necessary and complete Tax Depreciation information to include in their relevant tax return. Where this is the case, the homeowner may need to lodge the relevant tax return and subsequently make an amendment once it is possible for a physical inspection of their home to occur and the Tax Depreciation Report fully completed.”

If it is not a demand, it is at least a strong recommendation by our governing body, and, while the statement was published in the context of the COVID-19 pandemic, its principles apply at any time and are not ambiguous: a lack of inspection (more context on that below) jeopardises the accuracy of the report. We also seek advice from the NTAA, and their public position matches ours. Many providers have been foregoing inspections for years in scenarios where they shouldn’t have been, but are now using COVID-19 as a thin veil of legitimacy. Their motives are transparent to us.

I see nothing in my post that suggests we can depreciate previously used residential assets.

The example you provided is fair enough but was either cherry-picked to support your stance, or at best misunderstood what I was saying and addresses scenarios I was not referring to. In your example, you’re talking about a quantity surveyor who has been attached to the project from the start, and that is rarely the case for us when the average investor calls to engage us for a previously owned residential property. Even in a residential apartment block that might be, say, ten years old, knowledge of original costs might not be worth much if, for example, the previous owner has made their own additions, and all we have to go on is a real estate agency’s long shot of a kitchen. We all know how accurate they can be in depicting reality.

In most cases, there is no prior knowledge of construction costs, and in such cases, the most accurate report will result from an inspection—these are the instances I was referring to. BMT will sometimes forego another inspection in a near-new residential development, but only in instances where we have substantial experience there. Rarely will listing pictures and CoreLogic give the same level of information that an inspection yields (things will always be missed in photographs), and if you don’t have the same level of information, you don’t have the most accurate report. There can be a fine line between estimation and guesswork. We prefer the former.

Thank you for kindly providing the link to your blog. I am not a quantity surveyor nor a member of the AIQS (I have never represented myself as either), but I have worked closely with Nol Petrohelos and Bradley Beer for eight years and they have fifty years of combined experience as associate-level AIQS members. They also talk to Grant regularly on the topics above but do not wish to comment on his behalf. I did not presume to speak for the AIQS. I posted a link to their own website, where they spoke well enough for themselves.

 

I agree with everything you’ve said here.

A $300 report - or even a $400 report isn’t going to be worth the paper it’s written on.

 

BMT prepare the depreciation reports for a certain developers investment clients in Brisbane, as they have a deal with the developer to do this.
However the developer relies on another QS firm to prepare their progress payments during construction, because BMT either can't or don't provide this service.
So the QS that knows all the construction costs and knows the building inside and out, doesn't get a chance to do the depreciation report for the investor, as a BMT report is provided as part of the purchase.
However i have seen a comparison between the two companies, where the qs firm who did the construction payments (who also do depreciation) had deductions over five years that were tens of thousands of dollars more than the BMT report.
The company that sells the most, doesn't necessarily sell the best!

 

Personally, I use Washington Brown for new builds, as their costs are considerably cheaper if you give them an itemized break down of the costs from the build contract and they don’t have to come to the property.
BMT are great for existing properties, although expensive. But I have done some head to head comparisons with other QS firms vs BMT, and BMT have come out on top.

 

Hi Sean,

We do Progress Payment reports for developers and often - but not always - also provide the Tax Depreciation for their investor buyers.

I have always found our reports to out-perform the other providers by many thousand dollars over the 1st 5-years.

But...short sighted investors often go for the absolute cheapest report they can get.
And virtually always to their detriment.

As my grnadmother would tell me...

You can lead a horse to water but you can't make it drink!

 

Good to hear you are having a win there Shazz!

 

I used BMT many yrs ago for an IP (Unit, not new) in Brisbane and their service was great.

My accountant commented that it was one of the most thorough schedules he'd seen.
So imo they were good value.

 

Hi Piston_Broke
So is the quality of the report more important to you than the quality of the returns?
I know its hard to know if you are getting the best possible figures and you probably trust that because the report looks pretty comprehensive, that they must be doing a good job.

In the situation I saw, with the comparison of the two reports, it was a difference of roughly $60K over five years. My client who got the report was more than happy to have gone with the other company, as he was getting potentially $4K plus a year on average, more in his back pocket.

And that is part of the debate on this page, people get good service from a provider (which I also think is very important) a report 30+ pages long at a certain fee, but how does the client know they are extracting every last cent from their investment property, from depreciation?

 

Hi Will

You can get good cheap reports, so think we shouldn't use that old adage "you get what you pay for"!
BMT generally charge around $700+GST for a report regardless of where it is in the country. But if they are doing work for a developer like mentioned in my previous post, they have been known to reduce this by half, as they are getting a large quantity of reports to do in the one development.
So that doesn't mean the quality of the report has halved.

And this comes back to your statement, that you might be the best QS for the job, as you have done the progress claims for the development and know the construction costs and everything that goes into that property, like the back of your hand.
How do the people know that they should use you, rather than the first QS firm they find on their google search?