Issue 32 2012

Share the benefits of a split depreciation schedule

Last year approximately half of the depreciation schedules completed by BMT were for more than one owner.

Ownership structures influence how depreciation deductions are calculated. Properties with multiple owners can create a complex tax situation. A BMT Tax Depreciation Schedule makes life easier for Accountants by splitting depreciation deductions. This ensures investors’ claims are maximised for any percentage combination of ownership.

When applying depreciation legislation to assets for properties with multiple owners, the cost threshold depends on each owner’s interest in the asset. For example, assets valued at less than $300 are usually written off immediately. However, in a 50:50 ownership situation, items under $600 can be written off immediately. Similarly, assets must be valued at less than $1,000 to qualify for the low-value pool for properties with a single owner. In a 50:50 ownership situation, items that are valued under $2,000 will qualify for accelerated depreciation.

Multiple Owners Case Study

Two friends purchase a property with a 50:50 ownership share. This example highlights the difference between simply halving the deductions and ensuring legislation is applied to each individual’s depreciation claim 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.

Deduction assessment
Without 50:50 split With 50:50 split
Year1 $5,547 $6,039
Year2 $4,628 $4,671
Year3 $3,763 $4,600
Year4 $2,871 $3,211
Year5 $2,218 $2,600
Total Deductions $19,022 $21,121

The situations are identical except the BMT 50:50 split concept has been applied in the second scenario. This has allowed for accelerated depreciation by qualifying more assets for immediate write-off and the low-value pool. BMT’s 50:50 split schedule would create an additional $2,099 in tax deductions. BMT Tax Depreciation is leading the way with this new approach to preparing depreciation schedules. BMT 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.