A blog by Paul Bennion.
A Deppro Tax Depreciation schedule will make light of any issues when it comes to depreciation schedules when there are multiple owners involved.
A recent survey compiled by reputable home loan company found that around 70% of respondents show that they would be buying their next investment property with their spouse or family member. This is a huge figure and at Deppro we can break down the tax implications of this into an easy to understand schedule.
Deppro Tax Depreciation will make sure that you get the maximum deductions in this split ownership situation.
INCOME TAX ASSESSMENT ACT 1997 highlights:
Certain depreciable assets (also known as fixtures & fittings) can be pooled together and depreciated at a higher rate, this is known as ‘low-value pooling’. For depreciable assets to be eligible their value must be lower than $300 or $1000. Depreciable assets that are valued under $1000 are eligible for a higher depreciation rate of 18.75% in the year of purchase and a rate of 37.5% per year for the assets remaining effective life. Depreciable assets that are valued under $300 are able have their entire value depreciated immediately. Investors need to be aware that the ownership structure of their property will influence the deductions available to each individual party.
A common ownership structure is 50:50, this may be between a husband & wife, siblings, parent & child or friends. In this scenario depreciable assets valued up to $2000 are eligible for low-value pooling’, whilst depreciable assets valued up to $600 are eligible to have their entire value depreciated immediately.
Cast Study 1
Recently Deppro compiled a Tax Depreciation Schedule for a husband and wife with a 50:50 ownership structure. The Investment Property had a dishwasher inside valued at $1300. Taking into account the 50:50 ownership structure, each owner is entitled to 50% x $1300 = $650. This results in a depreciation rate of 37.5% from the second year of the asset’s effective life instead of the standard annual depreciation rate of 20% under the diminishing value method.
Case Study 2
2 couples purchased an investment property with each party having an equal 25% share. The Investment Property has an intercom system valued at $1000. As each owner is entitled to a 25% share of this asset, this asset is eligible to have its entire value written off in the year of purchase as each investor owns one quarter of the value of the intercom which equates to $250. Therefore each owner is able to claim their entire share in the year of purchase.
As an increasing percentage of investment properties are being purchased by multiple owners. Deppro recognises the need to cater for a variety of ownership structures.