Quantity Surveys - can they be disputed?

From: David H

This is a combination of two topics I have seen mentioned a couple of times in this forum - quantity surveys and the depreciability (I think I just invented that word) of certain fittings, including kitchens.

There was a thread earlier this year on the depreciation of kitchens and whether or not they were fittings, and hence deductible over a shorter period, or part of the building. The general conclusion was the ATO took it to be part of the building.

I have two IPs and both QSs have furniture (and some other stuff) shown is part of plant and fittings. My accountant took the ATO view and changed it. So my depreciation schedule doesn't reflect my QS. The QS reports were prepared by two different companies, but are very similar.

I have also recently seen a statement in one of the more reputable property investment group newsletters that "Taxation depreciation schedules for property must now, to satisfy the terms of a recent ATO directive, be supplied by a QS. Schedules prepared by an accountant are no longer acceptable."

So, I have a bunch of questions from that:
1) Do others have their QS reports varied by their accountant when preparing the depreciation schedule
2) Do others simply use their QS report verbatim, and hence have their kitchens etc depreciated at the higher rate?
3) Do others who use their QS report verbatim get them queried by the tax office?
4) Can anyone point me to the new tax directive?
5) Given the new tax directive, can accountants now adjust QS reports?

Thanks in advance,
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Reply: 1
From: Rixter ®

Your best bet in finding the correct answer would be to contact the ATO yourself....after all if your car needed repairs you wouldn't ask you local butcher would you??

Happy Investing,
Rixter :)
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Reply: 2
From: Astro Boy

Hi DavidH,

Haven't managed to get my 1st IP going YET, but went to an info session yesterday and heard a guy from one of the QS firms (Herron Todd White) and some of what he said is probably relevant to your questions...

He basically said that they will stand by any report that they produce (apparently only a couple of the QS firms will do this), that includes an ATO audit of what has been claimed - he quoted something like 4 rejections of their schedules by the ATO as a result of audits out of the last 4000 they had issued, of these they replied (explaining reasoning behind the claims) in detail and had 3 overturned, the other one the ATO said they were incorrect but let the claim stand anyway.

The big HOWEVER, was that they will only stand by a client if the schedule is 100% unaltered when provided to the ATO (or used in a claim). He suggests that a large number of accountants will alter a QS report to fit in with their accounting software packages etc... (keeping things easy).

As I mentioned - no direct experience myself, but thought this may be of interest.

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Reply: 2.1
From: Steve Navra

Hi David,

As regards kitchen cabinets etc, the QS view, which conforms with the relevant act, is that they are deductible as fixtures and fittings.

However, there is a precedented case where the tax office had this ruling overturned and thus these items are regarded by the ATO as part of plant. (Building)

So, do you go with the law (the actual act), or comply with the ATO interpretation??

Sam is correct in his assessment that if you put up enough of a fuss, the ATO will accept the fixtures deduction, but at the end of the day is it worth 'taking' them on?


My advice is to go with the ATO opinion - it makes very few dollars difference to your final deductible amount, and is less of a hassle.
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