February is the month of love – a time when we celebrate being in a partnership with one another, including those with whom we share property.
Those who purchase a property with a partner, friend or colleague can benefit from claiming depreciation, as can those who purchase a property on their own.
According to a survey conducted by Finder, 49.9 per cent of people believe it’s a good idea to purchase property with a partner. With the ever-increasing house prices, more and more people are struggling to get their foot on the property ladder. For this reason, it has become increasingly popular to buy property with a partner in order to reduce the financial stress of owning a home.
Many investors are unaware that co-ownership can substantially increase the depreciation deductions available to all owners of an investment property.
To assist co-owners in their claims, specialist quantity surveyors can provide split depreciation schedules for any property with multiple owners. A split depreciation schedule allows assets to be depreciated according to each owner’s interest in the individual items. For example, assets with an opening value of $300 or less can be written off immediately. However, in a 50:50 ownership situation, items under $600 can be written off immediately.
Similarly, assets valued at less than $1,000 qualify for the low-value pooling method for properties with a single owner. However, in a 50:50 ownership situation, items that are valued under $2,000 will qualify for accelerated depreciation due to each owner’s share of the item.
Case study: co-ownership
A couple purchase a property with a 50:50 ownership share. The below example highlights the difference in depreciation deductions when a 50:50 ownership is considered versus one without.
Taking into account 10 fixtures normally found in a residential property with a total value of $27,462, the quantity surveyor conducted an assessment on the deductions to show the couple what they are entitled to claim.
In this case study, a 50:50 split schedule would create an additional $2,099 in tax deductions in the first five years alone. By applying the 50:50 split concept, this allows for accelerated depreciation as assets qualify for immediate write-off and low-value pooling.
A split schedule can take into account any number of owners and ownership percentages from two owners at 60:40 to 1:99 or even four owners at 70:15:10:5.
For owners with lower percentages of ownership, the low-value pool and immediate write-off will apply to more assets, increasing deductions earlier.
Split depreciation schedules not only assist accountants to calculate an individual’s tax return, but will also support couples in determining their depreciation entitlements.