In a recent post we advised that all investors get a depreciation schedule for their investment properties to maximise their deductions. But did you know you that if you are a co-owner in an investment property you can get even further tax benefits by splitting the depreciation schedule according to the proportion of ownership before working out the deductions?
TaxGo achieves a better tax return for our clients by first splitting the costs of the property for each investor and then working out the deductions that might apply. Because of this cost splitting many assets fall below the $1,000 threshold and are considered by the ATO as part of a low value pool which currently has a deprecation rate of 18.75% in the first year and 37.5% each year afterwards and assets below $300 get a 100% deduction rate.
Because the costs of the property are split this means that our clients can often claim more in their tax returns and write off the asset sooner.
Let's look at an example of how a split depreciation schedule can help you with equal co-ownership.
Example 1
Suppose the property has blinds valued at $1,727 with a standard depreciation rate of 16.67%. This means that in the first year the depreciation would be $287.
However with co-owners the asset would be worth $863.50 to each owner allowing the asset to be considered part of the low value pool which gets a deprecation rate of 18.75%. The deduction for the first year would be $324.
Example 2
Suppose the property has a bathroom heat light worth $485 with a depreciation rate of 18.75%. This means that the in the first year the depreciation would be $90.94.
However, with co-owners, the asset would be worth $242.50 to each each owner and get the low value pool depreciation rate of 100%. The deduction for the first year would be $485.
So why not give TaxGo a call today.