Depreciation deductions for jointly owned rental assets

If a renal property is jointly owned, each joint owner can claim an immediate write-off where their interest in a renal property depreciating asset is $300 or less*(under S.40-80(02) of the ITAA 1997, assuming the other conditions are met), even if the overall cost of an asset exceeds $300.

(*) Under S.40-80(02), depreciating assets costing $300 or less are written-off in the year of purchase (subject to some exclusions, including where the asset is part of a set of assets acquired in the same income year where the total cost exceeds $300).

For example, if a rental property is jointly owned by two persons (i.e., 50/50), a depreciating asset costing up to $600 my be entirely written-off in the year of purchase.

In contrast, if the property has only one owner, the same asset would have to be depreciated over its effective life if it cost more than $300 (or it could be allocated to an Low Value Pool).

(#) Under Subdivision 40-E, depreciating assets costing (or written down to) less than $1,000 (except those eligible for the $300 immediate write-off) are pooled and decrepitated using a diminishing value rate of 18.75% in the first year, and 37.5% thereafter.

Similar opportunities may also be available if the cost of each owner’s interest in a depreciating asset is under $1,000, because the asset can be allocated to an LVP as a low-cost asset, even if the asset’s overall cost is $1,000 or more.

It also shows the huge benefit that taxpayers can derive from engaging a firm of quantity surveyors to provide a deprecation report that sets out the value of the rental property’s assets.


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