Owner-occupiers and investors both want an accurate report. Investors have two reasons to care about who writes it that never apply to someone buying a home to live in.
The first is that in NSW, nobody has to be licensed to call themselves a building inspector, so choosing an independent building inspector is a decision you make without any help from the regulator. The second is that the report describing the property’s condition on the day you settle quietly sets the tax treatment of every repair you make to it for years afterwards.
Neither of those is a sales pitch. They are both consequences of how the law works here, and they are the reason experienced Hunter Valley investors are fussier about their inspector than first home buyers usually are.
Nobody Has to Be Licensed to Inspect Your Property
This surprises most people, including plenty of investors on their third or fourth purchase.
Until 2009, doing a pre-purchase inspection for a fee in NSW required a licence. It was called building consultancy work, it was regulated under the Home Building Act 1989, and pre-purchase inspection of dwellings was a prescribed category of it. You needed a licence from what was then NSW Fair Trading.
That stopped on 16 September 2009. Building consultancy work came out from under the Home Building Act through the Occupational Licensing Legislation Amendment (Regulatory Reform) Act 2009, part of a Council of Australian Governments push to rationalise occupational licensing and cut red tape across the country. The NSW Government’s own guidance still lists building consultancy work under categories of work no longer regulated.
The practical effect has not changed since. There is no licence to check, no register to search, and no minimum qualification to meet. Anyone can print a business card, buy a moisture meter and start charging for reports on the biggest asset you own. We’ve looked at what deregulation has meant for inspection standards in more detail.
Pre-purchase inspections have been flagged for inclusion in a proposed new NSW building licensing framework, but that has not commenced. Today the position is exactly as it has been since 2009.
What to Check When There’s No Licence to Check
Since the state is not vetting inspectors, the vetting falls to you. Four things are worth asking before you book.
A current builder’s licence number, which you can verify yourself on the NSW public register. It is not required for inspection work, which is precisely why it tells you something.
Professional indemnity insurance, and a certificate of currency rather than a verbal assurance. If a report misses something significant, this is what stands between you and wearing it.
Whether they do repair work, or refer trades. An inspector who profits from the repairs they recommend has an interest in what the report says. Ours don’t, and you should ask anyone you engage the same question.
A sample report. Ask for a real one. If it is a page of ticked boxes, you will not be able to use it for anything later.
An independent building inspector will answer all four without hesitating. Anyone who bristles at the questions has told you something useful.
The Tax Reason Investors Care More
This is the one that gets overlooked, and it costs the most.
The Australian Taxation Office treats repairs differently depending on when the problem started. Work you do to fix damage or deterioration that arose while the property was rented out is generally deductible in the year you pay for it.
Work you do to fix defects that already existed when you bought the property is not. The ATO calls these initial repairs. They are capital in nature, they are not immediately deductible under section 25-10, and the position holds even if you had no idea the problem was there when you bought. Taxation Ruling TR 97/23 sets this out, and the reasoning is that you paid a lower price for a property in worse condition, so fixing it is restoring a capital asset rather than maintaining an income-producing one.
Those costs are not lost. They may be claimable as capital works over time or added to the cost base for capital gains purposes. But the cash flow difference between an immediate deduction and 2.5 per cent a year is substantial.
So the question that determines the treatment is factual: what condition was that thing in when you took ownership? Answer it with a dated, detailed, independent report and you have evidence. Answer it from memory three years later and you are guessing.
To be clear about what we are and are not: a building inspection is not a tax depreciation schedule. That is a quantity surveyor’s work, and it is worth getting one. We are not tax agents either. What we produce is the factual record of condition that your accountant and your quantity surveyor both need to work from.
Why a Vendor’s Report Is Weak Evidence
Vendor reports get offered to investors constantly, usually with the suggestion that it saves a few hundred dollars.
Set aside the obvious point that it was commissioned and paid for by the person selling to you. Think about what you need that document to do in three years, when you are substantiating whether a repair was an initial repair or not.
You need a report prepared for you, dated before settlement, by someone with no relationship to the transaction. A report commissioned by the vendor’s agent does not carry the same weight, and in NSW a vendor is not even obliged to tell the agent that earlier reports exist.
You Don’t Live There
The other thing separating investors from owner-occupiers is simple. You are not in the building.
An owner-occupier notices the door that has started sticking, the corner of the ceiling that looks different, the smell in the laundry after rain. Those are early signals and they are free.
An investor’s information comes from a tenant who reports what has become inconvenient and a property manager whose routine inspection is a tenancy check, not a building assessment. Both are doing their jobs. Neither is looking at subfloor ventilation or the condition of the flashings. We’ve written separately about what that gap means for a landlord’s duty of care.
That is why regular inspections on a held asset are worth more to an investor than to almost anyone else. You are buying back the information an owner-occupier gets for nothing.
Across the Hunter
The region’s rental stock ranges from new estates around Lochinvar and Huntlee to Federation and post-war housing through Cessnock, Kurri Kurri and Maitland, plus acreage around Pokolbin and Branxton where sheds, tanks, septic systems and long driveways all sit inside the asset you are buying.
Older stock carries movement, and acreage carries infrastructure that never appears in a suburban report. Both need someone who has seen a lot of them.
Book an Independent Building Inspector in the Hunter Valley
We are licensed builders and licensed timber pest inspectors, we carry professional indemnity insurance, and we do not do repair work or take referral fees from trades.
Call 0488 885 203 or order an inspection online, and ask us anything from the checklist above before you do.
This article is general information. It is not tax, legal or financial advice. Speak to your accountant or registered tax agent about how the ATO’s treatment of repairs applies to your circumstances.