» split depreciation schedule

Tis the season for sharing

BMT team — Fri, 23 Dec 2016 00:11:29 +0000

Given that median house and unit prices have continued to rise in some areas of the property market during 2016 and in Sydney and Melbourne in particular, it’s no surprise to learn that more investors are choosing to take advantage of co-ownership. Recent figures from Mortgage Choice show an increase in first home owners co-buying with friends and family, up from 7.9 per cent to 9.2 per cent. Investors too are also taking advantage of the benefits which co-ownership can provide them, such as increasing their buying power by combining their income and savings, improving borrowing capacity and reducing the burden of the corresponding expenses involved in holding the property. Given it is the season for sharing, we thought we would provide details about how co-ownership will not only make it easier to invest in property, but also explain how this can affect the depreciation deductions investors can claim. To ensure that depreciation claims are correct and maximised, investment property owners are encouraged to speak with a specialist Quantity Surveyor to request a tax depreciation schedule for their property. If a property has more than one owner, it is recommended to select a depreciation schedule provider, such as BMT Tax Depreciation, who outline deductions based on each owner’s percentage of ownership in each individual asset. By splitting an assets value by ownership percentage first, each investor potentially will qualify for higher depreciation deductions. Split schedules enable co-owners to increase deductions for plant and equipment items earlier in their effective lives using depreciation methods such a low-value pooling and immediate write-off. Let’s take a look at each of these methods and explain how these should be calculated for assets which are found within a property with a 50:50 ownership split. Low-value pooling Low-value pooling is a method of depreciation which allows an investor with an ownership interest in an asset of less than $1,000 in value to claim deductions at an accelerated rate of 18.75 per cent in the year of purchase and 37.5 per cent each year afterwards. As each investor’s ownership interest may qualify for the low-value pool, co-ownership expands the number of items that can be claimed at this higher rate of depreciation. For example, in a 50:50 ownership situation, items valued less than $2,000 can be written off immediately. Immediate write-off Legislation allows property investor’s to claim an immediate write-off for assets with an opening value of $300 or less. In a situation where ownership is split between one or more parties, the rule allows investors to claim an immediate write-off to items where an owner’s interest in the asset is less than $300. For example, in a 50:50 split scenario, items valued less than $600 can be written off immediately. Example scenario Below is an example of the difference obtaining a split depreciation schedule will make for two investors who co-buy an investment property with a 50:50 split. As you can see, in the first financial year alone the owners can claim an additional $492 by requesting a depreciation schedule with a 50:50 split. Over five years of cumulative claims, the total difference for the owners in their deductions using the split schedule is $2,099. The increase in depreciation deductions helps owners to greater improve their tax returns and therefore their cash flow. Whether you’re an investor with just one property, an investor who purchases an investment property with your partner in a 50:50 split, or even if it is for four owners who choose to split deductions at 70:15:10:5, a comprehensive depreciation schedule which is tailored for the investors needs and considers the property owners circumstances will provide additional cash flow. This extra money really can come in handy to help with holding costs throughout the year, or even be beneficial for the owner at Christmas time, when any savings may just help you and your family to share some of the festivity around your Christmas tree.

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Couples who own property love depreciation deductions

Bradley Beer — Wed, 10 Feb 2016 04:06:07 +0000

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. Learn more: Split your costs to maximise deductions 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, BMT Tax Depreciation 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 ten fixtures normally found in a residential property with a total value of $27,462, BMT Tax Depreciation 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 just 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. If you would like more information on how a split depreciation schedule could benefit your scenario contact us today on 1300 728 726, or complete this form and we’ll contact you. This article was first seen online on Sourceable.net View the full article here: https://sourceable.net/couples-property-love-deductions/

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Maximising depreciation deductions for multiple owners

BMT team — Wed, 02 Jan 2013 03:00:31 +0000

Determining depreciation deductions on an investment property with multiple owners can create a complex tax situation. A BMT Tax Depreciation schedule makes life easier for Accountants by splitting up depreciation deductions, regardless of how many owners have a share in a property. A survey compiled by Mortgage Choice found 71% of respondents indicated they would be purchasing their investment property with a partner, sibling, parent or friend. When multiple people buy a property they become either ‘joint tenants’ or ‘tenants in common.’ Ownership structures can influence how depreciation deductions are calculated. BMT Tax Depreciation will ensure deductions are maximised for each ownership situation. In this article we will look at: Pooling for multiple owners BMT Tax Depreciation case study Pooling for multiple owners Legislation states that some assets within an investment property can be grouped together and written off at a higher rate. To qualify for these groups the asset’s value must fall below $300 or $1,000. Assets which fall under $300 are able to be written off immediately (this option is called the ‘immediate write-off’). Assets which fall under $1,000 are entitled to an accelerated depreciation rate of 18.75% in the year of acquisition and 37.5% per year there after (this option is called ‘low-value pooling’). Both options will be affected depending on the ownership structure of the property. For example, in a 50:50 ownership situation, items under $600 can be written off immediately and items that are under $2,000 can qualify for the ‘low-value’ pool. Example one Three sisters decide to purchase an investment property together with a one third share each. The property has a split system air conditioner at a value of $2,600. Considering the one third share, the individual value of the split system for each sister is 33.3% x $2,600 = $867. This means that instead of depreciating at 20% under a normal diminishing method each year, it will qualify for the higher rate pool of 37.5% each year following the year of acquisition. Example two John and Mary purchase an investment property shortly after getting married. They purchase as joint tenants and their accountant apportions 50% of the total deductions to each of them. In this scenario, the ‘immediate write-off’ legislation affects their return. For the ‘immediate write-off’, individual assets with a value of less than $300 can be written off as a 100% deduction in the year of acquisition. Their investment property has a mechanical door closer at $95 and ceiling fan at $290. Both of these assets will be written off as 100% deductions in the first year. However, they also have a room air conditioner with a value of $580. As they own a 50% share each, according to the Australian Taxation Office (ATO), they each own half the value of the room air conditioner, or $290 each. The 50:50 split means that they can both individually claim their share of the air conditioner as a 100% write-off with because their share is under $300 in value. BMT Tax Depreciation case study Two friends purchase a property with a 50:50 share. This example highlights the difference between simply halving the deductions and ensuring legislation is applied to each individual’s interest considering the 50:50 split. After listing ten fixtures normally found in a residential property with a total value of $27,462, BMT Tax Depreciation conducted an assessment on the deductions. The situation is identical except for the fact that the 50:50 split has been applied to each individual’s share, which has allowed for some accelerated depreciation. BMT’s 50:50 split report would save this investor an additional $2,099 in tax deductions over the first five years of owning the property. BMT Tax Depreciation are leading the way with this new approach to preparing our depreciation schedules and can take into account any split purchase percentages, including 50:50, 70:30 or even 1:99. Read more: Split schedules maximise depreciation deductions For more information contact our office to speak with one of our qualified tax depreciation specialists.

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