{"id":8635,"date":"2016-07-17T01:00:41","date_gmt":"2016-07-16T15:00:41","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=8635"},"modified":"2016-07-17T01:00:41","modified_gmt":"2016-07-16T15:00:41","slug":"little-known-co-ownership-benefit","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/little-known-co-ownership-benefit\/","title":{"rendered":"Little known co-ownership benefit – Brad Beer"},"content":{"rendered":"

 
\nWith property prices steadily rising, co-ownership of property is becoming increasingly common. Co-owning property has the immediate benefit of increasing your purchasing power while reducing expenses. Brad Beer<\/strong>,<\/a> from\u00a0BMT Tax Depreciation<\/a>,\u00a0explains the little known benefits of split depreciation schedules in this case as well.<\/p>\n

<\/h4>\n

Transcript:<\/strong><\/h4>\n

Kevin:<\/b>\u00a0 With property prices continuing to rise, co-ownership of property is becoming increasingly common. Co-owning property with a friend, a family member, or a business partner has the immediate benefit of increasing an investor\u2019s purchasing power while reducing the burden of corresponding expenses.
\nSpecialist quantity surveyors can supply split deduction schedules by applying methods that substantially increase the depreciation deductions when an investment property has more than one owner. What are some of the methods they use? Let\u2019s turn to our experts in this field, BMT Tax Depreciation. Brad beer joins me.
\nGood day, Brad.
\nBrad:<\/b>\u00a0 Hi Kevin. Great to be here. How are you?
\nKevin:<\/b>\u00a0 I\u2019m very well, thanks mate. Thanks for your time again.
\nBrad, I wonder if you\u2019d explain the low cost and the low value assets. What are they?
\nBrad:<\/b>\u00a0 Yes, absolutely. What happens when items are purchased as part of your investment property for a value of less than $1000, the legislation just allows us to write them off quicker because they are put into what\u2019s called a low cost pool. And it\u2019s anything that has a value of less than $1000.
\nThe low value pool is if it drops down to that value of less than $1000 as you start claiming that depreciation. So it may have been $1200 in the first year and you claimed some of it in the first year, and when it gets down to that lower value, you get to claim these things at higher rates.
\nKevin:<\/b>\u00a0 What\u2019s the accelerated rate of deductions that these items can be claimed at, say, when low value pooling is used?
\nBrad:<\/b>\u00a0 What it is, rather than its normal effective life rate, which might be 15% or 20%, it\u2019s actually at 18.75% in the first financial year without a pro rata adjustment and 37.5% in all the following years. Now, 37.5% is a pretty high percentage. It\u2019s much higher than the 15% or the 20% that a lot of things actually get claimed over otherwise.
\nKevin:<\/b>\u00a0 Brad, why is it important to choose a depreciation schedule that assigns the owner\u2019s interest in each asset first before calculating depreciation?
\nBrad:<\/b>\u00a0 The simple reason for that is that when you buy a property and you\u2019re buying a whole bunch of things including what we\u2019ll call simple assets, if the asset had a value of let\u2019s say $1600, if you owned half of that asset you\u2019re only actually buying half that asset \u2013 therefore an asset worth $800 \u2013 meaning you\u2019d get to drop into this low value pool straight away instead of at a later date. And all of the assets get split this way.
\nKevin:<\/b>\u00a0 Okay, yes. That\u2019s fantastic. Then using a cooktop as an example, what\u2019s the difference in the deductions a property owner can claim say with and without a split deduction schedule? Is that possible to tell us?
\nBrad:<\/b>\u00a0 Yes, it is. Let\u2019s take a cooktop as an example. Let\u2019s say that cooktop was $1624 in value. Under its normal claim, which is over 12 years, the first year of that cooktop would be a claim of $226. Now, if you just divide that by two, you\u2019d have a claim of $113 each, so $113 would be your claim.
\nIf you owned half of that property and you only owned $812 worth of that cooktop \u2013 as in half of it \u2013 then you actually go into this low value pool. And in the first full year at that 37.5% rate you\u2019d actually end up with a claim of $248 for your half of that cooktop. As opposed to just dividing your cooktop and getting the $113, it ends up at $248 if it was a year where you had that 37.5%.
\nWhen you do this across multiple items, it actually makes quite a difference sometimes to the early years of ownership if you\u2019re a partial owner.
\nThe other place that works really well is when you have things that can be claimed at 100% \u2013 if you owned something that\u2019s worth $500 and you own $250 worth of it \u2013 you\u2019ll get an instant deduction for that full amount because you\u2019ve actually split the value of the asset as opposed to getting it over years and years.
\nIt makes quite a bit of difference in those early years to maximize those deductions and therefore give you more cash back in your pocket.
\nKevin:<\/b>\u00a0 Yes, that makes a lot of sense. That leads me to another question, then. Talking about joint ownership, is there a minimum percentage of ownership in which a split depreciation can be applied?
\nBrad:<\/b>\u00a0 There\u2019s no minimum percentage. The regular is to go 50\/50, and then sometimes you see the husband and wife\u2026
\nKevin:<\/b>\u00a0 75\/25.
\nBrad:<\/b>\u00a0 \u2026A low percentage for the person with the lower tax rate. It doesn\u2019t matter if there are three owners, four owners, five owners; you can still split these depreciation schedules up quite easily if you have the software built properly \u2013 which we do \u2013 so that at your percentage of ownership, you get your percentage of the value of that item and therefore you get your claims. It will always maximize those deductions in the early years for each of these owners in a split-up situation.
\nKevin:<\/b>\u00a0 Of course, we\u2019re into a new financial year now. I guess any time is a good time to be talking about depreciation schedules, not just at the end of the financial year, Brad.
\nBrad:<\/b>\u00a0 You\u2019re going to do a tax return soon after the end of the financial year, so once you get to the accountant, it\u2019s best to have your depreciation schedules there ready. When we do one, we actually send a copy to the accountant as well so that when you turn up, he\u2019s had an opportunity to have the numbers in there ready to do it and not have to go back and try to make it happen at a later date.
\nKevin:<\/b>\u00a0 Yes, great information. That\u2019s why it\u2019s always good to deal with a specialist in their field, and that\u2019s why we recommend BMT Tax Depreciation.
\nBrad Beer, thank you so much for your time.
\nBrad:<\/b>\u00a0 Excellent. Great to be here, Kevin. Thank you.<\/p>\n","protected":false},"excerpt":{"rendered":"

  With property prices steadily rising, co-ownership of property is becoming increasingly common. Co-owning property has the immediate benefit of increasing your purchasing power while reducing expenses. Brad Beer, from\u00a0BMT Tax Depreciation,\u00a0explains the little known benefits of split depreciation schedules in this case as well….<\/p>\n","protected":false},"author":176692471,"featured_media":8636,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[34,10,11,13,36,17,25],"tags":[101],"class_list":["post-8635","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance-topic","category-kevin-turner-sponsored-channels","category-kevin-update","category-latest-story","category-property-investment-topic","category-property-investment","category-sponsored-channels","tag-podcast"],"yoast_head":"\nLittle known co-ownership benefit - Brad Beer - Realty Talk<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/channels.realty.com.au\/realtytalk\/little-known-co-ownership-benefit\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Little known co-ownership benefit - Brad Beer - Realty Talk\" \/>\n<meta property=\"og:description\" content=\"  With property prices steadily rising, co-ownership of property is becoming increasingly common. 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