Yes, and no. Historically, site inspections have been integral in the preparation of tax depreciation schedules and remain the best method to accurately capture all capital works and assets, thereby maximising the tax deductions available to the investor.
But is that always necessary?
The ATO has no ruling or stipulation as to whether a site inspection is required for the preparation of a tax depreciation schedule, however, industry professionals recommend inspections for certain properties, such as older properties and Capital Claims Tax Depreciation consistently recommends in-person site inspections for all commercial properties and large-scale units to ensure accuracy and compliance.
The ATO has also deemed site inspections unnecessary where appropriate verified information (including the final building costs, specifications, and plans) has been provided.
Today, in this modern information era, we have discovered that for most properties, a virtual site inspection is perfectly adequate for capturing all the necessary data, ensuring maximum tax deductions are claimed.
Capital Claims Tax Depreciation has been completing virtual site inspections for properties that qualify since 2019. In 2012, we began conducting evidence-based research, comparing hundreds of site inspection reports to virtual inspection reports, and found, in the majority of cases, that deductions were equivalent. In fact, there are some added benefits to virtual inspections as outlined below.
Read further as we explain how our team can achieve excellent results for investors, without conducting a site inspection.
What happens at a typical Site Inspection?
A typical property site inspection for tax depreciation purposes includes:
- Measurement of the gross floor area of the building
- Professional assessment of the age of the property and any additional capital works that have been completed (where construction dates are not known or available)
- Determining the construction type of the property
- Noting all plant and equipment assets
- Taking photographs for future reference and evidence of findings
Inspection of a residential property usually takes up to 30 minutes.
Is the Site Inspection completed by a qualified Quantity Surveyor?
Inspections by most quantity surveying firms are not completed by a qualified quantity surveyor. Usually, an inspector is trained by a quantity surveyor to identify and photograph the important information in the property that will be used to complete the tax depreciation schedule.
What does the Quantity Surveyor do?
The quantity surveyor uses the information that is captured at inspection, in conjunction with their construction management qualifications, and knowledge of relevant tax legislation, to professionally estimate:
- Construction dates (age of property)
- Construction type
- Valuation of assets
- Effective life of depreciable assets
The quantity surveyor then forecasts the deductions available each year for the owner to claim as a tax deduction.
What is the alternative to a physical Site Inspection?
A plethora of comprehensive information is available electronically to conduct excellent virtual site inspections. Additionally, there is also an extensive amount of online sales and rental information including photographs, along with information accessible via council databases, property manager inspections, and specific paid property information databases, combined with images and detailed information from the investor. In our experience (over 25 years producing quality tax depreciation schedules), much of the information collected at a physical inspection by an inspector today is a duplicate of the information obtained via skilled online research combined with detailed client information.
Will the deductions reported be the same?
As an investor, you should expect the same number of deductions for a property inspected virtually, as you would for a property inspected in person (provided your quantity surveyor has the systems, tools, and a skilled and experienced team to conduct the appropriate research).
We have been actively conducting virtual site inspections since 2019 and invested 7 years prior in research and technology development to aid accurate reporting. We have tested our processes by:
- Completing two reports for the same property via both methods to measure any discrepancies
- Tracking average claims per property
- Comparing the results of like properties where one has been physically inspected and one hasn’t
- Tracking our error rate (return of reports rate) to monitor any increase (our current report return rate is less than 1% and these are typically minor administrative errors)
- Utilising ATO-compliant evidence and documentation recording
- Ensuring Tax Practitioner Board code of conduct compliance
Our research shows that properties inspected virtually achieve the maximum deductions available to investors, and in some cases surpass our own estimates.
What are the added benefits of conducting Virtual Site Inspections?
The added benefits of a virtual site inspection are many:
- No disruption to the property manager and the tenant
- Faster report completion as we don’t have to wait to book an inspection (this can sometimes take weeks)
- Discounted fee – we pass on the time and cost savings of reduced travel to our clients
- Reduced environmental impact through less car and plane emissions
- Minimise hygiene and safety concerns – e.g. COVID-19, uncooperative tenants, unsafe properties
- All information collected is still verified by a Quantity Surveyor
- Reporting is timely and efficient
- Reporting is completed by a AIQS member
- All Capital Claims Tax Depreciation site inspectors have been trained by an AIQS member
Important – Engage a team that is skilled and experienced at conducting Virtual Site Inspections
Not every business in our marketplace agrees that virtual inspections combined with comprehensive online research is adequate to replace an in-person site inspection. As such, they may not have implemented the technical processes and team development to deliver an equally good result.
Capital Claims Tax Depreciation moved officially in the direction of conducting virtual site inspections for some properties in 2012. We did this for a number of reasons including:
- Availability of online and paid electronic information available
- Environmental reasons – less travel and emissions
- To maintain the safety of our team where inspections were not possible due to privacy concerns, or unsafe tenants or properties
Conducting quality Virtual Site Inspections requires:
- Access to quality paid property databases
- Skilled researchers
- A team skilled in how to navigate council and other property websites (for historic development applications/strata information etc)
- Tools and forms to assist any self-inspecting if required
- Experienced quantity surveyors who can easily identify and obtain any missing information
To find out if your property qualifies for a virtual site inspection, please contact our friendly team on 1300 922 220 or request a quote with an estimate of deductions here.
FAQ’s
What is included in a Tax Depreciation Schedule?
A tax depreciation schedule will include all your available tax depreciation deductions – this includes your Division 40 – plant and equipment asset deductions, your Division 43 – structural depreciation deductions as well as the Capital Gains Tax offset amounts for qualifying assets. Learn more about tax depreciation schedules.
Do I need a Tax Depreciation Schedule every year?
Your report will project forward for 40 years so you do not need to purchase a tax depreciation schedule every year. The only time you need to update your existing tax depreciation schedule is if you have completed any minor or major renovations, and Capital Claims provides this as a complimentary service.
Do I need a Tax Depreciation Schedule?
Yes! It can help reduce your taxable income and put more cash back into your pocket. You will need to organise a depreciation report from a qualified quantity surveyor.
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Get a Free Quote for a Depreciation Schedule.
We’ll include an estimate of your potential deductions, and if we can’t guarantee a strong result, we’ll let you know up front and there will be no cost to you.