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Real estate investing used to be a rather niche industry, confined to the few Australians who had significant reserves of cash and a genuine interest in the property market.   These days, you could be forgiven for thinking that everyone is a real estate investor – some much more successful than others. Michael Yardney shares the dos and don’ts of successful investors

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 explains the little known benefits of split depreciation schedules in this case as well.

Pete Wargent says there is a re-bound in population growth and he looks at what this means for our property markets with a special focus on the Victorian market.

 
Transcripts:
Little known co-ownership benefit - Brad Beer
Kevin:  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’s purchasing power while reducing the burden of corresponding expenses.

Specialist 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’s turn to our experts in this field, BMT Tax Depreciation. Brad beer joins me.

Good day, Brad.

Brad:  Hi Kevin. Great to be here. How are you?

Kevin:  I’m very well, thanks mate. Thanks for your time again.

Brad, I wonder if you’d explain the low cost and the low value assets. What are they?

Brad:  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’s called a low cost pool. And it’s anything that has a value of less than $1000.

The 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.

Kevin:  What’s the accelerated rate of deductions that these items can be claimed at, say, when low value pooling is used?

Brad:  What it is, rather than its normal effective life rate, which might be 15% or 20%, it’s 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’s much higher than the 15% or the 20% that a lot of things actually get claimed over otherwise.

Kevin:  Brad, why is it important to choose a depreciation schedule that assigns the owner’s interest in each asset first before calculating depreciation?

Brad:  The simple reason for that is that when you buy a property and you’re buying a whole bunch of things including what we’ll call simple assets, if the asset had a value of let’s say $1600, if you owned half of that asset you’re only actually buying half that asset – therefore an asset worth $800 – meaning you’d 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.

Kevin:  Okay, yes. That’s fantastic.