Back in the day, tax depreciation was not a service that quantity surveyors offered. In fact, it’s an industry that’s not much older than 21 years whereas quantity surveying in general can be traced back to at least 1859 but possibly 1785. Sorry, you’re right, you didn’t ask. Anyway, my point is that most quantity surveyors don’t do tax depreciation. The largest QS companies in Australia and abroad are traditional quantity surveyors that are more specialised in estimating, contract administration and project management than depreciation. Most established firms that specialise in depreciation once started in traditional estimating but moved over to the tax side of things and abandoned that service. There are surely also companies that popped up just doing depreciation. That’s all very well, but I think both are neglecting a key advantage to maintaining a traditional estimating department.
There are probably three factors that merge to assist an estimator. Experience, cost databases/libraries and current project data. Companies that don’t maintain an estimating department are missing the third component. Here’s why that matters.
In our business for example, I’m the tax depreciation guy. I’ve done it for as long as I dare admit and we run a department that specialises only in tax depreciation. On the other side of the business are our traditional estimators. One of the key differences is that on the tax side, we’re almost exclusively working on projects that have been already built, and often built tens of years ago. On the estimating side, they’re almost exclusively working on things that are about to be built or are coming out of the ground right now. The tax side of the business benefits hugely from that.
Why? Simply because the cost data we have access to is minutes, hours and days old, rather than months and years old. Working in cost control for current projects under construction gives us access to progress claims that developers are making to the banks, showing us the details of what each stage of the building is costing them. It goes right down to the individual trades too where we can see how much painting costs per square meter and how much the labour component of carpentry is costing for example. Without this information, we’d be relying on cost databases that come out yearly at best and due to the pace of price movements in Australia, the costs are technically already out of date.
It’s true that the tax side of our business does work on projects where the total construction cost is already known, but based on the data gathered within the system, that only happens 14.3% of the time. Even when it does, the level of detail often never goes past just the total cost.
I guess there’s a lot of ways to spin your point of difference, but I firmly believe that working with a firm that has a traditional estimating department presents real advantages on the tax depreciation side, and in turn, better depreciation.