Hi all,
Just a quick question.
Senario: I bought our PPOR in 1995. 3Bed 1Bath cheapy. Moved to Canberra now and PPOR has been IP for about 4 years. When purchased I estimate that the house was approx 40 years old.
My question is:
Any point in obtaining a quantity surveyors report for depreciation?
I don’t know much about depreciation so any comments would be helpful.
Thanks[8D]
You will always miss 100% of the shots you don’t take!
Hi Ronulas, saw your question looking forlorn and unanswered, so I thought I’d put my $.02 in. My Q/S report on my new 3 br house cost $450 in 98, (probably a fair bit more now) but it was well worth the cost as it was new. You won’t have any building allowance, and it may be difficult to establish the age of all your fittings. It would probably not be worthwhile unless you have quite a few dollars worth of new or near new fittings. You can easily find out the recommended life quite easily for things like carpets etc from your accountant/ tax guide etc.
For me it was worthwhile because there are so many little thing the Q/S expert knows about with new properties, and it’s such a breeze when it comes to tax time with the report done for several years after purchase.
I’m not very experienced at older properties though, so others who are might have a better idea of its (q/s report) worth.
JThanks for your reply doogs!!
You will always miss 100% of the shots you don’t take!
Hi, I’m interested in the answer to this as well, as I have my eye on a property built in the 1930s. It has a few years old kitchen and laundry, two renovated bathrooms also less than 5 years old. Original timber floor is still there, looks great (no depreciation of course) Would it be worth it to get a Q/S report do you think if I decide to buy this property?
Regards, CeliviaCelivia It’s probably not worth the cost, as you just wouldn’t find enough deductions to make it worth it. Perhaps I should list the Q/S report for a brand new home below, so you can get some idea of what’s depreciable, and how much doesn’t apply to an older property.
Firstly the wholesale cost of the building may be depreciated at 2.5% pa, ie over 40 years, so this won’t apply.
Secondly modular kitchen cupboards are depreciated at 2.5% pa (don’t know why) so you should still be able to claim a small amount for these. Eg my house: kitchen cupboards were assessed @ $2585 which amounts to the princely sum of $65 pa depreciation! You will be able to claim the whole of the written down value remaining if you ever replace these however.
The rest is as follows (note that several items could be deducted 100% as they were worth less than $300):Item|Cost|%pa
Carpets | 2365 | 25%
Electrical equipment:
-Distribution gear | 1085 | 20%
-Lighting units | 741 | 100%
-Master Antenna system | 220 | 25%
Counter fittings/shelving |1627 | 100%
Vanity cupboards | 1127 | 20%
Shower screens | 995 | 20%
Hot Water system | 2420 | 20%
Kitchen general | 298 | 100%
Kitchen stoves | 763 | 20%
Wall Oven | 961 | 20%
Security screens | 1446 | 100%
Telephone connection | 229 | 20%
Ventilation plant | 252 | 100%That’s it for a brand new 3 bedroom house, so you can see just how much of that won’t apply for an older home. All the new stuff you’ll probalby know about, so it’s just a matter of knowing the depreciation rate and age. Work on 20% and you won’t get in trouble. The Q/S report may be $500+ so it probably won’t be cost effective.
Regards, Jim.
He who hesitates is sometimes saved!…Thurber.
I disagree, it could well be worth while.
A QS report should cost around $400 and it’s tax deductible. Ring up a couple of QS’s and ask them some questions. They should be able to give you a rough idea of whether it’s worth pursuing.
Even if items like carpets, curtains, hot water systems, stoves etc are a few years old, you have still effectively paid something for them. – This is the amount you can depreciate.
For instance on a $100K property if the land is valued at $40K, the QS may determine that the value of the building is $35K which leaves $25K of depreciable fixtures and fittings.
Rod.
I guess it all depends on the age of your fittings Rod. My Q/S report cost $450 five years ago, so I assumed it would be a bit more now. I think your 25k example is a bit unrealistic for an older house though. My fittings totalled 16k for a brand new fully carpeted 3 bedroom home. Of course it’s tax deductible, but depreciation is also just a tax deduction, so comparing relative cost vs benefit is still the same ratio. Tax just divides everyting by 2 or whatever.
Just one point about my figures Celivia, I quoted 20%, which was for the diminishing value method. The prime cost method typically uses 13%, and I believe (one of you learned accountants may care to verify this) that you can adopt either method for your partially depreciated fittings, irrespective of which method the previous owner may have used. eg say your hot water system cost $2,000 three years ago:
Dim Value 20% will result in a written down value (WDV) of $1024 but 13% prime cost will result in the WDV being $1220. If it was 8 years old however, Dim Value will leave $335 but Prime Cost will leave zero.
Perhaps a good Q/Surveyor would do all this for you, ie pick the best method for each item. It must be a bit tricky if they have no idea of the age of each fitting. It’s probably worthwhile just for the sake of credibility with the tax man if you have no evidence of costs. I would appreciate input from any investors with real experience of Q/S reports for older properties.
JimThanks heaps, people, I think what I’ll do now is call the RE agent to ask if he can get the owners to make a list (or make copies) of all the things they installed, eg the ari conditioner, the kitchen etc, so this will help the QS make a report. It may be worth is, especially if the QS report is deductible. As I understand, correct me if I’m wrong, you don’t need a new report done every year, it will last for years? SO then it may be worth it.
Thanks again, regards CeliviaThat’s correct Celivia, the report is once only. They should give you at least 8 to 10 year’s worth of data, but the rest can easily be derived from the last WDVs. Let us know how it pans out, I’m curious to know how they estimate it all. They may just give you a report with everything at prime cost, and another with everything at dim. value, leaving the choice up to you. (That’s what they did with mine, but older prop’s may be different)
Regards, Jim.He who hesitates is sometimes saved!…Thurber.
I have had clients recommend Deppro for QS Reports.
Check out the FAQ page.
Cheers,
Simon Macks
Mortgage Hunter
[email protected]
0425 228 985Hi all,
I’m just looking at a QS report for one of my IPs (this was done by Deppro).
This property is a 3BR bouse built in the 70’s with some minor renovations done around 1996.Total cost of property $143365
Value of plant $14170
Capital works allowance $6807
Land (from rates notice) $29911
Other $92477.The depreciable amounts are the capital works (from the 1996 renovations) and the plant. The plant value was determined by an onsite inspection by the QS and includes items like carpets, ceiling fans, curtains, lights, stove, tv antenna, hot water service, garden sheds.
the other amount is the amount ineligible for depreciation.
This report gives a deduction in the first year of $5851, $2900 in the 2nd year, this rapidly decreases to $365 by year 6. This is using the diminishing value method. The capital allowance is $200 per year, which lasts for 34 years.
The report gave a full breakdown of both the diminishing value and prime cost methods for 40 years.
I consider this well worth the $440 (incl GST).
Rod.
G’day
having read the emails attached to this topic, it has answered some of my thoughts. I have recently purchased an IP, built in the 60’s, the inside has been totaly renovated, new walls, new wiring, new power points, kitchen, bathroon, carpet, tiles, roof, gutters etc. Based on what has been written it may be prudent to obtain the services of a QS to see just what is claimable.
regards
Alan
Gidday,
just my 2 pennith worth I’ve just purchased a new unit in QLD (+ve I had’nt read Steve’s book then) I’ve been quoted up to $1000 for a Quantity Surveyor to go in and list everything for depreation. I ran this by my accountant thinking that it was far too high. My accountant told me to spend the money. She said that the QS is licensed and signs his life on the dotted line, and will list every little thing that can be listed. My accountant says the alternative is that She and I sit down and try to guess. If you are ever audited by the ATO. you just handball to the signed QS report. Also tax deductable as stated in above post.R2 [:0)]
Thanks for showing us some real figures Rod. I shouldn’t go running off at the mouth (keyboard) without knowing all the facts. I did ask early in the post for some real figures though.
I just spoke to the Q/Surveyor who did my new properties to ask him about old ones. He said that there are two ways to do it, one is basically as I assumed above, by depreciating at an acceptable rate from the original purchase price, which usually results in poor figures. The other is for the Q/Surveyor to simply have a look at the condition of all fittings, and assign a portion of the purchase price to all of them. eg if a stove is 7 year old, and still in perfect condition, then it can be reasonably assumed that a fair proportion of the purchase price would be due to that stove. The fittings can then be depreciated by either dim. value or prime cost starting from that assigned value. It is usually better to put all low value items (ie < $1000) into your low value pool, which can be depreciated at a faster rate, ie 37.5% pa dim value.
He said that it’s really up to us to make a judgement of the value of the Q/S report, ie if the things that attracted us to the property were the fixtures in good condition, then it’s probably worthwhile, but if the property is basically gutted with no capital works entitlement then it’s probably not.The quote I received is now $550 for all houses, new or old.
Jim.
Gidday,
I’ve been quoted up to $1000 for a Quantity Surveyor to go in and list everything for depreation.
R2
Sounds expensive R2dee2! Have you checked out Deppro as mentioned above? They have a Brisbane contact. I’ve been using Culling, Smit & Associates who are in Brisbane. Website: http://www.petrie.hotkey.net.au/~csan/
You might have a problem if your property is in Weipa though!
JimI always use a QS and have found them to be very good value. $1000 for a report sounds very expensive though.
Try to get them to value a few properties for you at the same time – ie if you are planning to buy a few over the next few months – have them all done at once and negotiate a bulk fee.
I have been able to get QS reports done that way at around $250 per property by doing 4 or more in the same area together.
Just had one done last week in Melbourne by Deppro, 6 year old place, cost me $550. Tried to get them to do a better deal for multiple properties but they wouldn’t come to the party. Anyway, the report looks good, still need to run it by my accountant.
I’ve also got a 70 year old place which I decided not to go ahead with, based on my discussions with them.
However, should you be unlucky enough to get audited one day, not sure what help you’ll get from Deppro. They quote in the report that the figures are based on “their interpretation” of the income tax assessment act, just to cover their back side I guess.[}
]Just had one done last week in Melbourne by Deppro, 6 year old place, cost me $550. Tried to get them to do a better deal for multiple properties but they wouldn’t come to the party. Anyway, the report looks good, still need to run it by my accountant.
I’ve also got a 70 year old place which I decided not to go ahead with, based on my discussions with them.
However, should you be unlucky enough to get audited one day, not sure what help you’ll get from Deppro. They quote in the report that the figures are based on “their interpretation” of the income tax assessment act, just to cover their back side I guess.[}
]
Thanks heaps, people, I think what I’ll do now is call the RE agent to ask if he can get the owners to make a list (or make copies) of all the things they installed, eg the ari conditioner, the kitchen etc, so this will help the QS make a report…
Thanks again, regards Celivia
Just one thing I forgot to mention Celivia. My Q/Surveyor told me that it is very rare for them to have available receipts and/or purchase dates for all the fittings. They may get partial receipts, but he prefers to just use his own judgement of the value of fittings, ie you probably don’t need to chase receipts etc.Jim. (Sorry to keep dragging this post back to the surface, but it’s a fairly important topic, especially as the theme of this forum is +vely geared properties, ie older ones)
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