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Helping couples to split the costs and increase their deductions by Bradley Beer

by Bradley Beer (B. Con. Mgt, AAIQS, MRICS), Managing Director of BMT Tax Depreciation

With the price of real estate in the capital cities and affordability of property a current topic of contention in the media, this may have played on the mind of many potential buyers and resulted in them reconsidering making a purchase of late.

For Real Estate Agents, this poses a concern on how they can secure buyers for investment properties available on the market.

One of the ways that potential investors can bridge the gap to purchase a property is for them to consider co-ownership. In fact, data from ING Direct towards the end of last year suggests there has been a surge in joint mortgages of nearly 10 per cent during the twelve months to November 2015 in Melbourne and Sydney.

For Agents who are trying to secure the sale of a property, there is also an added benefit many are unaware of.

When an investment property has multiple owners, this can influence the depreciation deductions found for the property. It is important to make investors aware of the benefits of claiming depreciation for any rental property purchase. This is particularly the case when a property is co-owned.

What is property depreciation?

Depreciation is a non-cash deduction the Australian Taxation Office (ATO) allows the owner or owners of an investment property to claim a deduction due to the wear and tear of a building structure (capital works deduction) and its fixtures (plant and equipment depreciation) over time. Depreciation is described as a non cash deduction, meaning the investor does not need to spend any money to be able to claim it.

How do ownership structures affect an investor’s claim?

When a specialist Quantity Surveyor applies depreciation legislation and calculates deductions for the sole owner of a property, assets valued less than $300 can be written off immediately. Similarly, assets valued less than $1,000 will qualify to be added to a low-value pool.

If a property has multiple owners, the threshold applies to each owner’s interest in the assets. For example, in a 50:50 scenario, items less than $600 can be written off immediately and low-value pooling will apply to items valued less than $2,000. By employing these methods, this accelerates the depreciation of eligible assets and results in more deductions for the owners.

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.

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 writeoff and the low-value pool. BMT’s 50:50 split schedule would create an additional $2,099 in tax deductions. Any ownership percentage or number of owners can be taken into account when completing a depreciation schedule for a property, whether it is two owners at 60:40 or 1:99 or four owners at 70:15:10:5.

Making a potential investor aware of the depreciation deductions they can claim during tax time for properties available on the market can also help investors find that wriggle room in their budget to help secure a sale.

BMT Tax Depreciation can provide a free depreciation estimate for any property listed for sale for potential buyers. To learn more, Real Estate Agents can contact 1300 728 726.

Bradley Beer is a regular keynote speaker and presenter covering depreciation services on television, radio, at conferences and exhibitions Australia-wide. Please contact 1300 728 726 or visit www.bmtqs.com.au

 

 

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