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Joint ownership of investment properties

BMT team — Wed, 06 Sep 2023 07:25:43 +0000

It’s common for investment properties to be owned by multiple parties. This is known as joint or partial ownership. This approach of shared ownership can offer a number of advantages and, in certain scenarios, reduce risks, making it an attractive option for some investors. What is joint ownership and how does it work? Joint ownership of an investment property allows multiple parties to own a share of a property. This can be achieved through different ownership structures such as joint tenants, tenants in common, or a trust. Joint tenants is when a property is held in the name of two or more parties with right of survivorship and can refer to any combination of people. Each owner has equal shares. Tenants in common is an arrangement when two or more people co-own the same property but with no right of survivorship over the other. The ownership proportion can be equal or unequal. A trust is an arrangement where a trustee manages or holds a property for the benefit of one or more individuals or organisations (known as a beneficiary). Each party to the joint ownership arrangement is responsible for their share of the mortgage repayments, maintenance costs, tax benefits and other expenses associated with the property. The parties can also agree on how the property will be managed, such as appointing a property manager or sharing the responsibilities themselves. Why do people choose joint ownership? Joint ownership of an investment property can be beneficial for a number of reasons, including sharing the costs of purchasing and maintaining the property, accessing greater borrowing capacity, and reducing risk. This type of ownership also allows investors to enter the market with less individual upfront cash. How does depreciation work in properties with joint ownership? There are differences in depreciation eligibility for properties with joint ownership. Depreciation is available according to the proportion of ownership. For instance, if Investor A owns seventy per cent of an investment property and Investor B owns the remaining thirty per cent Investor A can claim seventy per cent of the depreciation deductions, while Investor B can claim the remaining thirty per cent. Legislation allows properties with one owner to claim an immediate write-off for assets with an opening value of $300 or less. But when an investment property is co-owned, for example, in a 50:50 split of two parties, a split depreciation schedule allows the owners to each claim an immediate write-off for items where their interest in the asset is below $300. This allows owners to claim an instant asset write-off for items which are more than $300 in total value. The same method can be used when applying low-value pooling. When an owner’s interest in an asset is less than $1,000, these items will qualify to be placed in a low-value pool. This means that these assets can be claimed at an increased rate of 18.75 per cent in the first year regardless of the number of days owned and 37.5 per cent from the second year onwards. In scenarios where ownership is split 50:50, by calculating an owner’s interest in each asset first, the owners will qualify to pool assets which cost less than $2,000 in total to the low-value pool. The distribution of an asset’s value based on ownership percentages first will increase the number of assets for which investors are eligible for an immediate write-off or low-value pooling. This results in an accelerated rate of depreciation which will yield the owners increased deductions in the earlier years of ownership. A BMT Tax Depreciation split schedule displays the deductible value of each asset as a total deduction for each year of the asset’s effective life, plus the deduction available to each owner per year based on their percentage of ownership of each asset. For instance, a dishwasher in a property with a 50:50 split ownership will display a total first-year deduction of $500, plus a deduction of $250 available to each owner in that year. For more information our comprehensive co-ownership case study outlines the depreciation deductions with and without a split schedule. Having a correctly prepared split depreciation schedule is important to ensure all owners are deducting the correct amounts they’re entitled to. Especially in scenarios where an asset is not owned with a 50:50 split. Depreciation rules can become tricky for property owned by multiple parties, which is why it’s important to get in touch with a specialist quantity surveyor, so claims are maximised and fully compliant with current Australian Taxation Office rulings and regulations. BMT Tax Depreciation conduct site inspections so they can identity every available deduction to prepare comprehensive tax depreciation schedules. To learn more about split depreciation schedules, call BMT on 1300 728 726 or Request a Quote.

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Home affordability – five ways Mum and Dad can help their children

Chan Naylor Team — Thu, 30 Mar 2017 23:01:35 +0000

Home affordability is the current talk of the town. How can we assist first home buyers to enter the Property Market? The “Bank of Mum and Dad” has often been referred to as a means for first home buyers to enter the market, but how can parents practically do this? There are many things parents must take into account before they would undertake such assistance, things like can my child manage his or her money? Or have they a track record in saving and budgeting? Have they a stable job? What are the implications if they have a bad relationship or divorce? It is not a straightforward decision for parents to make. Here are five strategies that Mum and Dad could consider to assist their children. Strategy one- lend the money With housing prices, so high the most difficult challenge for a first home buyer is to raise the 10-20 per cent deposit plus costs to buy their first home. If Mum and Dad are lucky enough to have some spare cash they could lend that to their children on a commercial basis, alternatively parents may have built equity in their own home and this equity is sitting in the property and not being used. They could approach the bank and unlock this equity by establishing a line of credit facility secured against the home. They could then access these funds and on-lend the deposit for the first home to their children the amount of interest you change your children could be the equivalent you are paying to the bank and the terms and conditions of this loan is totally dependent on you. In both circumstances, there should be a formal loan agreement drawn up between the parents and child and registered with the appropriate authorities and we would always recommend that a lawyer is engaged to assist. Strategy two – provide guarantees Mum and Dad may have a property or assets with a bank, they can offer these securities or guarantees to the bank limited to the amount of the deposit of the child’s new property, then the bank would lend the child the money for the property. The parents would have to provide Personal guarantees and perhaps these could be limited to the deposit. This strategy is risky in that if the child defaults on the loan the bank will come knocking on the parent’s door looking for recompense, so use this strategy only for the right type of child and use a lawyer to assist with the appropriate agreements. Strategy three -joint venture Mum and Dad may be looking to invest in property and may decide to enter into a joint venture arrangement with their child whereas the parents put up the cash for a percentage of the property and allow the child to use the property as security for them to buy their own share. The acquisition could be done as tenants in common setting out the percentage of ownership. If the child wants to acquire further interest in the property, there would be stamp duty and potential capital gain tax issues. Once again there should be documentation put in place to clearly set out agreements. If the child is living in the property appropriate rental agreements should be put in place or even consider using an agent to ensure this is managed at arm’s length. Strategy four – encourage children to move interstate Many property commentators have been arguing the fact that housing is only unaffordable in the capital city of Sydney and to a lesser extent Melbourne and if the younger generation migrated interstate to more affordable areas like Perth, Brisbane, Adelaide and the Gold Coast the prices are more affordable. Most parents want to be within reach of their children for obvious reasons, however the reality is that if they cannot afford to live in Sydney and Melbourne perhaps they should look at other states and if parents encourage that move by moral and or financial support. The strategy could be that the whole family, parents and children pack up and move interstate to be closer together and this may also help to resolve Mum and Dads retirement plans. Strategy five – earlier education is better In my view this is the most important strategy, it is not impossible to save money. Unemployment is low and the average Australian salary is quite good, however sacrifices need to be made. If Mum and Dad start teaching their children about money management early in their life this will help them manage their money and build the deposit for their first home. A lot is to do with education and mindset so encourage your children to attend seminars on money management and property, pay for their tickets and attend with them for support. In Sydney, you will need a reasonable job and to save at least $150,000 to allow you to enter the market. Four or five years of sacrifice, perhaps two jobs and tight budgeting should get the average Australian a deposit. I know of young people aged late teens who are working hard with numerous jobs and saving $30,000 per annum, so the earlier they start the better. Disclaimer: This article contains general information; before you make any financial or investment decision you should seek professional advice to take into account your individual objectives, financial situation and individual needs. Click for more detail regarding this disclaimer. Article provided by www.chan-naylor.com.au/ originally published online at www.chan-naylor.com.au/housing-affordability-5-ways-mum-dad-can-help-children-by-david-naylor/

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