Quantity Survey-On the Purchase Contract?

From: Jenny F


Hello, I was hoping to get some advice in respect of QS report for a 7 year old property. I believe that a QS is worthwhile (so I don't need convincing) but need some clarification of what to expect.

First, I'll set the scene - potential property is a free-standing townhouse in Canberra (in a Body Corporate) - 7 years old. Owner-occupied since new.

I have done a search of the Forum, and would like to double-check what I think I gleaned (I have read a little between the lines as well so I am hoping one of the more experienced investors could advise if I have interpreted correctly):

1. Have the Quantity Survey done before exchange and have it annexed to the contract, so ATO will know what the "agreed" values of the building, fittings and fixtures is.

2. If for some reason you do not annex the QS to the contract, and instead have it done immediately after you take possession, does this make any difference to the way the ATO views the depreciation claims?

3. The QS should value each depreciable item (for example the hot water system, stove, carpets, curtains etc) at their "current" value assessed by condition and not just calendar age - this would mean that property in as-new condition (such as immaculate carpet & curtains) would be valued at an amount nearer to new purchase price than would be the case if the carpet was worn or just assessed by its age alone For example in this property the carpets are 7 years old and the ATO assigns an effective life of 10 years. So if assessed by age alone, the carpets would be given a "value" less than (roughly) 30% of new price. Yet given that the carpet is immaculate, then the value, I would think, should be higher as a result??

4. If this is true, what effective life is then assigned to the item? Is it what is left of the "original" life or does it start from now with a complete life (for example the ATO says the effective life of a hot water system is 20 years - is the life of the Hot Water System in a 7 year old house deemed to be 20 minus the 7 already "accrued" ie 13 years, or does it restart for 20 years from the date of sale to the investor owner?

5. Would minor fittings such as door furniture (which might collectively be depreciated in the "Low Value Pool" in the first four years if the property was new) be expected to be given a value at all?

I am asking these detailed questions so I can be sure I understand what to expect of the QS in this situation and hence ultimately understand the impact on my cashflow.

Finally, if anyone has any recommendations for Quantity Surveyors in Canberra I would be grateful - I noticed that Herron Todd White seemed to be favourably mentioned by a number of people but they seem not to operate in Canberra (at least not yet anyway). I'll let my fingers do the walking as well, but any personal recommendations would be appreciated.

Thanks
JMF
 
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Reply: 1
From: Dale Gatherum-Goss


Hi

You seem to have the idea quite well, except, that you do not need to have the QS report done before the contracts are settled. I certainly would not spend my money until after settlement - just in case. . .

The tax office will accept a QS report, regardless of when it is done.

The QS will do his job and provide you with a report that will show what deductions that you are entitled to claim, depending upon the property, its age and condition.

Dale
 
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Reply: 2
From: Glen Monahan


Jenny,
in my experience it doesn't matter when you get the QS report done. You could have the report ready by 30/6 and it is applicable retrospectively to the date you purchased within the same Fin Year of course. If you want to claim a reduction in the tax you pay as you go then you would need to lodge it first.
Regards,
Glen.
 
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Reply: 2.1
From: Jenny F


Thanks Glen and Dale,
I'll just get the QS report afterwards then (as I did when I bought a new property). As it has turned out I decided not to proceed on the 7yr old property after all. So I'll just keep looking.
JMF
 
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