By using a qualified quantity surveyor, we ensure that the schedule which has been prepared complies with the legislation and is legitimate for tax-related purposes. As per the ATO ruling, only a qualified person, (even accountants are considered not qualified) is allowed to prepare such reports which can be high relied upon for tax-related purposes.
As per the new Tax Agent Act 2009, all quantity surveyors are required to be registered with the tax practitioner board in order to provide tax related services which includes the preparation of tax depreciation schedules.
As part of the requirement of tax practitioner act, any entity wishes to provide tax related services such as the preparation of tax deprecation schedule are required to be registered under the Tax Practitioner Board register as per Tax Agent Act 2009. A stringent assessment is usually adopted by the board to provide approval to providers of such services.
Access to the Tax Practitioner Board register can be viewed at www.tpb.gov.au
Australian Taxation Office allows investors to claim a deduction on depreciative assets of their investment property. These deductions are benefits which investors can use to offset their income and reduce their taxable income. This is frequently termed as negative gearing.
These deductions are considered non-cash expenses when preparing your income tax return for the year which would consequently reduce your taxable income and consequently improve the cash flow of the investor through tax savings.
Fees that you have paid to prepare the tax depreciation schedule by a qualified person is fully deductible.
There are 2 main components which can be deductible: -
1) Plant and equipment of the building (also known as Division 40)
Plant and equipment identified here usually refers to the finishing works of the building allowing the building to be in a liveable state.
These expenses includes the provision for walls, ceilings, balconies, carpets, furniture and fittings, lightings, tiles, dish washer, blinds, dryer etc.
Renovations to your property are also included and deductible under this division.
Common areas on the building are usually proportionate to each individual unit of the building for claimant.
These equipments are depreciated under the guideline provided by the Commissioner of the ATO over their estimated useful life.
Research indicates that between 15% - 35% of construction costs are attributable to such costs.
2) Capital work allowance of the building (also known as Division 43)
Capital work allowance identified here refers to the structural element of the building construction.
As per the Commissioner of the ATO guidelines, depending on situations, these costs are deducted over a period of 40 years at a rate of 2.5% per year.
In order to gain access to such deduction, the estimates used must be prepared by a qualified quantity surveyor as approved by the Tax Practitioner Board.
The basis of negative gearing is to ensure that we reduce our tax payable through our investments. The following scenario will highlight the example of the benefits of negative gearing.
(Note 1: The tax rates used are as of the financial year ended 30th June 2011)
(Note 2: No tax benefits and concessions such as low income tax offset has been accounted for in the calculations)
Comparison A - Comparison with a person of $ 80,000.00 per annum income
Smith has an income of $ 80,000.00 per annum. Effectively his tax rate would be calculated as followings: -
| Taxable Income | $ 80,000.00 |
| Tax based on $ 80,000 | $ 17,850.00 |
| Medicare levy on taxable income (1.5%) | $ 1,200.00 |
| Total tax payable | $ 19,050.00 |
Individual earning an income of $ 80,000.00 per annum and holding an investment property.
| Taxable Income | $ 80,000.00 |
| Depreciation schedule (Average 2 bedroom) | $ 7,000.00 |
| New Taxable Income | $ 73,000.00 |
| Tax based on $ 73,000 | $ 15,750.00 |
| Medicare levy on taxable income (1.5%) | $ 1,095.00 |
| New total tax payable | $ 16,845.00 |
Tax savings would be $ 19,050.00 - $ 16,845.00 = $ 2,205.00.
Comparison B - Comparison with a person of $ 40,000.00 per annum income
Smith has an income of $ 40,000.00 per annum. Effectively his tax rate would be calculated as followings: -
| Taxable Income | $ 40,000.00 |
| Tax based on $ 40,000 | $ 5,850.00 |
| Medicare levy on taxable income (1.5%) | $ 600.00 |
| Total tax payable | $ 6,450.00 |
Individual earning an income of $ 40,000.00 per annum and holding an investment property.
| Taxable Income | $ 40,000.00 |
| Depreciation schedule (Average 2 bedroom) | $ 7,000.00 |
| New Taxable Income | $ 33,000.00 |
| Tax based on $ 33,000 | $ 4,050.00 |
| Medicare levy on taxable income (1.5%) | $ 495.00 |
| New total tax payable | $ 4,545.00 |
Tax savings would be $ 6,450.00 - $ 4,545.00 = $ 1,905.00.
For further information, please contact Mr. Shin from True Elite Business Services Pty Ltd
Mr. Shin is a full qualified CPA member and also a registered tax agent whom is qualified to provide such advice.
Our prices start from $ 650.00 per property schedule depending on the work which has to be performed.
Our service of excellence guides ensures that all our clients are provided with a site visit by our specialist and also providing on-site advice. It is very crucial for us to provide such services as it assist in maximising the potential of such deductions.
Most cheaper competitors does not offer site inspection which in our opinion defeats our main purpose in obtaining the maximum benefits and deductions claimable.
Our prices are deemed to be cheaper than our competitors who also provides a site inspection.