Practitioners providing advice on property investments within an SMSF need to take into account all of the tax implications involved to ensure their clients enjoy the full financial benefits from their property allocations, according to a sector specialist adviser.
“Real estate investments will only turn out to be the bonanza they are sometimes portrayed as if accountants and advisers are providing SMSF clients with proper guidance, particularly in the area of claiming depreciation and capital works allowances,” Deed Dot Com founder Manoj Abichandani said.
“SMSF trustees, particularly if they are inexperienced property investors, have a knowledge gap when it comes to the allowances they can claim for depreciation and capital works and unfortunately that gap is not being bridged by very many accountants or advisers.”
An easy way for advisers and accountants to address the problem would be to engage the services of a quantity surveyor at the time the SMSF purchases a property, Abichandani said.
“A quantity surveyor will conduct a physical inspection of the property to ascertain its key features, fixtures and fittings. The ATO (Australian Taxation Office) will look upon the quantity surveyor’s findings as an expert report, giving the accountant and their client a very firm basis for making depreciation claims,” he said.
“Quantity surveyors can prepare reports on industrial, residential and commercial properties and the outcome of acquiring a quantity surveyor’s report is invariably a reduction in the taxable income an SMSF must report.
“In other words, accountants will be able consistently to reduce their SMSF clients’ tax bills by utilising quantity surveyor reports.”
Quantity surveyor reports could also be useful in determining any unclaimed depreciation from plant and equipment replaced during the legal renovation of an income-producing SMSF property, he said.
