One of the difficulties I regularly encounter with prop investors is persuading them of the merits of a QS report. Thought I would share a example of a somersoftie who raised that same point with me. It indicates the value of a good depreciation report and combining that with good tax advice.
This person built two homes on a subdiv lot of land. Both identical. She believed her builder estimates etc were sufficient and prepared two years of tax returns on that basis. Like many investors she sought to avoid unnecesssary cost as cashflow is good but tight. Spending $1,000 on reports seemed so expensive. Her total depn deductions were around $8,000 for each of 2012 and 2013 tax. I suspected that was (very) low.
I encouraged her to seek BMT's views. She reluctantly agreed to my advice & encouragment and invested in late June in the reports.
Deduction value for each property for each year closer to $10K each....
Deductions of $20k vs $8k...I proposed we amend those two years returns. Expected new refund that will be paid in the next month ??? $11k...And her 2014 refund will also be around $4k higher....So in a two month period her $1,000 investment has returned $15K in real cash - Direct to her bank account. Cost to do this : $1,000 for BMT and $400 for for me to amend 2 years....almost a 10:1 return.
I would encourage all investors who havent yet obtained a real current QS report to do so and to consider amending their past two years tax returns. Time is ticking...Your two year window is closing....But that view comes with a catch:
*** If you amend your return the wrong way you will be audited !!! The ATO consider amended returns by property investors with a refund increase of $5k as a automatic review trigger. They can start to explore all your deduction claims...It is slow and can turn up a small issue which escalates. If its done by an experienced tax adviser I find you can bypass that problem by supplying all the correct information with the amendment request.
This person built two homes on a subdiv lot of land. Both identical. She believed her builder estimates etc were sufficient and prepared two years of tax returns on that basis. Like many investors she sought to avoid unnecesssary cost as cashflow is good but tight. Spending $1,000 on reports seemed so expensive. Her total depn deductions were around $8,000 for each of 2012 and 2013 tax. I suspected that was (very) low.
I encouraged her to seek BMT's views. She reluctantly agreed to my advice & encouragment and invested in late June in the reports.
Deduction value for each property for each year closer to $10K each....
Deductions of $20k vs $8k...I proposed we amend those two years returns. Expected new refund that will be paid in the next month ??? $11k...And her 2014 refund will also be around $4k higher....So in a two month period her $1,000 investment has returned $15K in real cash - Direct to her bank account. Cost to do this : $1,000 for BMT and $400 for for me to amend 2 years....almost a 10:1 return.
I would encourage all investors who havent yet obtained a real current QS report to do so and to consider amending their past two years tax returns. Time is ticking...Your two year window is closing....But that view comes with a catch:
*** If you amend your return the wrong way you will be audited !!! The ATO consider amended returns by property investors with a refund increase of $5k as a automatic review trigger. They can start to explore all your deduction claims...It is slow and can turn up a small issue which escalates. If its done by an experienced tax adviser I find you can bypass that problem by supplying all the correct information with the amendment request.
