how wildly depreciation reports vary from one quantity surveyor to another

Hi,

Is it possible that report from one quantity surveyor value the house less/more than another?

If this is true, should I get reports from 2-3 different QS and use the one that maximizes my return?

Of course this approach makes sense only if the $$ difference in tax return is more than cost of engaging 2 extra QS.

Please advise.

 

Who would spend 3 x $700 to form that view ? There will always be slight variance between three reports. The issues should be minimal. In some cases there could be major differences but I doubt this for reputable large firms. Some cheapie reports are pretty bad - Not uncommon to find at year 10 they just stop.

However a firm that does not attend the site and does a desktop report may have lower deductions than a diligent QS that does attend to site with substantial resources and experience. I once had a developer who sought a report from a reputatable QS for his buyers. It missed loads of items or vastly under-estimated costs for other items at a high end spec. They went to BMT for another view. BMT had earlier done the preliminary estimates for the bank and just had to do a site review for internal fitout and appliances etc. BMTs cost was lower for that reason. BMTs later report had greater deductions of a few thousand dollars in year one.

Otherwise its hard to have an opinion on comparing QS reports without spending(wasting) a lot of money.

Its like two car buyers. Both buy the same car. One will pay more than the other. Both may think they got a great deal.

 

I built three townhouses, but only had a single contract with a lump sum with the builder. I paid the builder in 6 instalments based on milestones.

I now need a depreciation report for one of the units I have rented out.

Would the QS take a “top down” approach and consider the overall cost, and try and apportion this across the three townhouses based on size, share of driveways etc as part of their analysis.

Or is that irrelevant and they would just apply $/m2 rates etc and take a “bottom up” approach?

 

Its worth doing if you expect your tax return/ over the 40 years to pay back more than the $6-700 cost of the extra reports.

I use Washington Brown for all mine as I feel their deductions work best for me at tax time. $80 doorbell chimes anyone? Even had BMT review my WashBrown reports and they admitted they’re hesitant about delivering the same amounts of depreciation. Im no depreciation expert, so have no clue whether the amounts are fair.

This comparison of two depreciation reports (diminishing value) should help. The 2nd report gives me an extra ~$1-2k per year. Decent return on investment for an upfront $600
Depreciation claimables - free report vs paid for

 

And what have the QS said? Why guess. Ask the experts. You don't know their industry. They will ask you for your costs and assess on site

 

If the actual costs are available, they must be used. Them's the rules. And yes, they will be apportioned according to size. The QS will value the Assets and deduct them from the build cost. It's a pretty straightforward job.
Scott

 

Whats the rules on getting 2 schedules done and taking the most favourable? Henry Kaye used to promote this years ago, but I think if you know the costs, from an estimate, this will prevent you using a second schedule.

 

Nothing. In some ways it's like asking two tax advisers to do your tax and hoping one is cheaper and a bigger refund. But it is twice the cost

 

In the grown up world of CIP we even get a third (in the case of rental valuations) - each party appoints a valuer and If your two valuers can't agree then it's pistols at 10 paces or a third valuer is appointed as arbiter.

@Depreciator & @BMT Tax Depreciation - If someone has elected one of the two methods for depreciation in their tax return, use it for a few years then decide to use the other (greater benefits in yrs 7 onwards), can they simply change system, are stuck with the chosen method, need an amended DS or get a new DS through someone else? (If they haven't done any works/negligible/maintenance since the earlier report prepared? )

 

No, once you choose either Prime Cost or Diminishing Value, you need to stick with it.

 

And it goes both ways, to be honest.

Or well it used to.

For properties built after 1987 and acquired 2nd hand the amount you can claim in terms of building allowance will be a lot closer from ALL QS's moving forward.

WHY?

Put it this way...If you a buy a property today for $400k - and that property sold for $200K in 1990....All QS's are going to say, that, roughly, it cost $110-$120k total to build in 1990, at max.

If someone has $120 as opposed to $130K the difference isn't great when you spread it out over 40 years (which is what you need to do).

Where the wild discrepancies occurred were in the revaluation of the plant - which has now been abolished on second-hand properties.

This post goes to the heart of what the Government wanted to change. But let's not forget that QS's were only ever qualified to estimate the costs of the section 43 allowance where the costs were unknown. And that has not changed.

What happened was that we became the "experts" at all things depreciable and in some ways quite rightly - because we are best suited in apportioning the plant and equipment value ratio as a factor of the purchase price, the land and most importantly in relation to the building cost.

The problem was that the guidance on the valuation methodology was weak at best and had two completely different schools of thought within our members.

If you ask me the new laws sux and very badly thought out.

When I met with treasury I gave them such an easy solution to nullify the constant revaluation of the plant and equipment - which I wrote about in my book KEEP CLAIMING IT!

In the book I've come up with 7 strategies to crack the new depreciation laws - you can access the free videos series in the link above.

Why is it free? Well, I think it sucks that Westfield for instance, can buy a 50-year-old shopping center and revalue the escalator - but you and I can't walk down to Alexandria, New Farm or St Kilda and buy a 1-year-old apartment and claim the depreciation on that one-year-old carpet.

I think it sucks that UniSuper or a large super fund (because they are big) can buy a block of one-year-old apartments and claim the depreciation...but you and I can't in our own Self managed super fund.

Do you think that's fair?

I could go on.

So my new strategies will hopefully level the playing field.