MCG QUANTITY SURVEYORS BLOG
Is your Quantity Surveyor endorsed by the Australian Tax Office (ATO)?
We’re no strangers to the politics of fear, thanks in no small part I suppose to the Bush administration. It’s true that fear is a very powerful emotion, and one that can be used to positive and negative ends. Take for example, products and services. We all have a fear of buying an inferior product that might break down, or otherwise not be quite what we had expected or needed. The tax depreciation schedule, as a product, is not immune from this kind of scrutiny and for good reason. You may not realise that depreciation schedules can differ from one firm to the next, and an inferior schedule can certainly cost you money. I’m insistent on clarifying the fact that the vast majority of depreciation schedules are extremely similar when it comes to the application of ATO legislation. After all, we all must adhere to the legislation. There are certainly differences in the layout and presentation of the figures but what makes one schedule better than another is likely to come from the time taken to put it together and the expertise and experience of the quantity surveyor.
One of the most important components of a great schedule is the inspection. There are certainly some properties where the difference between a great inspector and an inexperienced one is nil or minimal. However, real estate across Australia comes in many shapes and sizes. Of course there are the project homes and units with layouts and fixtures that you see everywhere but there are also the cheaply renovated, the expensive overhauled properties, the warehouse conversions and much more. A keen eye has seen us identify improvements that the current owner and even the council had no record or knowledge of.
This is where the difference between two quantity surveyors, or firms, can be important.
There’s also the time taken in putting the schedule together. The other evening I was working on a report where the owner had completed a renovation and had kept great records of the costs. Just prior to completing the report, I noticed the manufacture date on the hot water system was very recent, yet they purchased and renovated the property some time ago. A quick call to the owner was enough to jog the memory that it was part of the improvements, and resulted in better deductions and a happy client! Would every quantity surveyor have noticed or even made the call? I’d certainly like to think so.
I’m all for companies promoting their attention to detail, their client testimonials and resume of previous experience but I’ve increasingly noticed some firms resorting to lesser means of attracting clientele.
I’ve spoken to a number of clients who have been told that they ought to fear that their report might not be ATO compliant and even seen firms suggest they’re ATO approved or endorsed.
Let me set the record straight. There are two main memberships that a quantity surveyor needs to have to be able to prepare depreciation schedules. They must be registered tax agents under the tax practitioners board (TPB), and members of the Australian Institute of Quantity Surveyors (AIQS). Normally the AIQS membership is a requirement to meet the TPB standards. Investors should certainly ensure that their quantity surveyor meets these mandatory requirements.
The suggestion that a company is approved or in some way endorsed by the ATO is misleading and in my view, is a negative way for a firm to promote their service and their point of difference. In fact, if you look at the footer of the ATO’s ‘Good governance and promoter penalty laws’ you’ll note the following:
“You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or product.”
This of course relates to the material within, but shows in pretty clear language that the ATO is not about to endorse any person, service or product.
It’s one thing to advertise the fact that you hold the necessary qualifications or memberships to be able to prepare depreciation schedules to be relied on by investors, but in an effort to get this point across I believe some firms are taking their marketing a little too far into shaky territory.
The ATO is certainly able to audit an individual or company, and may indeed delve deep into the tax deductions and depreciation schedules. If this happens it’s up to the quantity surveyor to be able to justify their methodology, application of effective lives and cost estimates. If the quantity surveyor is not a registered tax agent or AIQS member, the report may very well be rejected and the quantity surveyor should expect a hefty fine and more. To my knowledge, this scenario has not yet happened in Australia.
Hopefully I’ve assisted to clarify what entitles a quantity surveyor to legally prepare depreciation schedules. As for the fear being stirred up about choosing the wrong one, I believe that property investors are smart enough to see through most of the marketing spin. From my perspective, there are much more important questions such as who will be completing the depreciation report and what their experience is. Ideally you should be speaking to the quantity surveyor on the phone and they should be able to answer all of your questions as well as provide you with any advice where applicable. You also want to insure that their name and signature is going to be on the report, to show they stand by their schedule. Avoid selecting a quantity surveyor based on price alone and always ensure that your property is being inspected.
Follow these basic points and I’m sure you’ll be pleased with your experience and can put aside the fear of the ATO not accepting your report.
Mike Mortlock is a Quantity Surveyor and Director of MCG Quantity Surveyors. MCG Specialise in Tax Depreciation Schedules and Construction Cost Estimating. You can visit them at www.mcgqs.com.au