Listen. I’m a Quantity Surveyor (QS) who specialises in tax deprecation so, frankly, I’ve heard them all:
Q. How can you tell if a QS is extroverted?
A. In conversation, he looks at your shoes instead of his own.
Q. How does a QS make a bold fashion statement?
A. He wears dark grey socks instead of light grey.
Q. What’s the difference between a QS and a lawyer?
A. The QS knows he’s boring.
And the painfully popular:
Q. What does a QS use for contraception?
A. His personality!
Well, folks, I’m here to explain why this is a raw deal. I refuse to see my profession labeled as the last picked when guests lists are made up. I tut-tut at the notion QS’s make semolina pudding look like a gourmet option. I refute that a QS can talk a street sign into a coma.
The fact is your QS is one cool cat and will be the life of your wealth-building party, so stop cutting them off at the velvet rope and check out the sweet moves they cut on your financial dance floor.
The thing about your QS is while all of the hipster also-rans of investing are trying to make themselves look good – talking a big game but failing to deliver on the financial fun stakes – your QS is all about making the good times sizzle.
When it comes to wealth building, we carry our import with confidence and command respect from the spreadsheet.
Why? Well… we’re the money!
Your QS is key to unlocking thousands of additional dollars each year – and you barely need to do a thing.
Now I know what you’re thinking, “Even the name ‘depreciation schedule’ sounds depressing!” but that’s because this wallflower document gets a bad rap. At my soirees, nobody keeps a QS in the corner.
Depreciation schedules allow property investors to claim the depreciating costs associated with their investment against their annual income.
And those schedules are the perfect invite because they’re the last guest to leave and they help with the cleaning up. Generally, a schedule is useful for about 40 years, so that is extra cash in your account for four decades if you don’t sell.
The money shot
We recently completed a comprehensive study of 1000 depreciation reports, which found that the average deduction was about $9414 in the first full year.
Do you know how many Jatz Crackers and French Onion dip you can buy for that sort of coin?
Unfortunately, the ATO is the fun police at this gig. They won’t just hand you a cheque for $10k, but rather reduce your annual taxable income by that amount.
The upshot? You pay less tax which is music to everyone’s ears.
To give an example, let’s look at an investor who earns $100,000 per year.
If they don’t have any deductions, they’d be liable to pay $24,632 in tax every year.
However, in the first year of owning an investment property, they can engage a QS to prepare a star-studded depreciation schedule and reduce their taxable income by $9414, according to our study.
As a result, their tax liability drops by about $3500, which means it’s ‘Celebration time, C’mon!’
Sensational property investment is all about the long-term, so if an investor was able to hold that property for 40 years – the life of the schedule – they’d be able to claim average deductions of $192,158.
That kind of money would cover a week on a Barrier Reef superyacht with catered dining for you and 10 of your closest friends.
Why you should ask the QS to arrive early
The first couple of years of owning an investment property are generally the most expensive for a landlord.
It’s during this initial period when the rent is not usually enough to cover the mortgage repayments and other costs such as owner corporation fees and council rates. The result is negative cash flow – or more money going out than coming in.
What a buzzkill!
However, that situation can be remedied by having a depreciation schedule prepared for your property. It helps carry you through those lean years by putting dollars back in your wallet each EOFY.
In time, your rent will grow. Once it’s covering your costs nicely, any tax return might be used for something sexier than plugging up a temporary cash flow hole.
Crank up the volume because I feel big fun ahead.
The serious bit
This has all been a bit of a laugh but it is important to understand that everyone’s situation is different because of varying incomes, types and ages of investment properties, as well as the reality of tax rates changing over time.
That said, our study shows what the average deduction looks like and is a solid barometer of how quantity surveyors can make you money while you party likes it’s 1999.
My recommendation is to talk to us – we can show you why knowing the numbers and applying the schedule can create the most thrilling of results.