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Does your tax agent make this mistake ?

Discussion in 'Accounting & Tax' started by Paul@PFI, 18th Feb, 2016.

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  1. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Many tax agents make a fundamental error when they prepare rental property tax returns. See if it affects you. I will explain the problem.

    It concerns QS reports with deductions for Depreciation and Cap Allowances. These deductions can comprise three elements :
    - Div 40 Depreciation
    - Low Value Pool
    - Capital Allowances (Div 43)

    The way I see it is I receive a report and it comprises tax advice. The QS report cost good money and I will use it. However some (many !!) tax agents think its clever to re-enter the report into tax software so that it looks complex. But when they do this they can irrevocably "break"the QS report deductions.

    Let me explain...QS reports are built using very complex software that the QS firm produces. It will take depreciable items and move them from Div 40 to the LVP when they are eligible and therefore it accelerates the depreciation within legal limits. (Big pat of the back for QS report complexity here).

    But when the tax agent reworks the report they can break this link and render inconsistencies between the tax return and the QS report. I often see new schedules created with different rates too... That can put the deductions at risk. I often see this and it confuses me. Its really a waste of client money to take a good QS report and rehash it by entering it into tax software. Its like retyping a letter each time rather than saving a template. And since almost every account I can think of bases their fee on time guess who pays for that wasted time ?

    Instead - Why not just take the numbers from the report and enter them. Simple. Sure a separate schedule can be created for new items such as a new oven, dishwasher after the QS report. A disposal of redundant items is no great challenge either.
     
  2. Daniel Taborsky

    Daniel Taborsky Well-Known Member Premium Member

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    Seems like an eminently sensible suggestion Paul. Although, I'm surprised the tax software can't move items into a LVP!

    How do you deal with disposals? Is it just a manual adjustment to remove the deduction for that item from the QS report?
     
  3. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Yes disposals are a "manual" adjustment and the file is open when I review that issue so its not complex. As all files are PDF its not hard to edit etc.
     
  4. Depreciator

    Depreciator Moderator Staff Member

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    I'm curious, Paul. There would be at least half a dozen different tax software packages that accountants use. Do any of them do the right thing with depreciation?
     
  5. Chilliblue

    Chilliblue Well-Known Member

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    That's why it is important to choose the right person for the job.
     
  6. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    I have never see one that can. Dont get me wrong, its functional on a item by item basis. It just can't handle transition to LVP. And when I see accountants who do rehash the QS report they often fall for a bigger mistake and "summarise" the items from the QS report which affects LVP in any event.

    Its so much easier to use the QS report that was prepared.
     
  7. dabbler

    dabbler Well-Known Member

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    I would expect them to use the report as is, not spend time meddling with it on the clock?

    PS I have not looked, but my thoughts on PDF is to stop exactly what your saying, only the author should be able to change/edit it.
     
  8. Northy85

    Northy85 Well-Known Member

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    How does the accountant go about altering the QS report when you replace an item like an air con? Do they take the cost of the new air con off of the report and then add it the new air con to a seperate spreadsheet? Or is it more complicated than that?
     
  9. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    That's as simple as it gets. I annotate the PDF file to limit overclaiming in future and add a new schedule to the return.
     
  10. BMT Tax Depreciation

    BMT Tax Depreciation Chris Business Member

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    Depreciation schedules can also be requested in an Excel format, which can make this easier for some people.
     
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  11. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Yes. However the problem is if I remove a line (ie a scrapped asset) the totals etc dont calculate. The excel file is just a text dump.
     
    Last edited: 23rd Feb, 2016
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