Depreciation for High Yielding property question ?

Hi All,

Does depreciation schedule still worthed to be done for investment property with high yield registered under low-income bracket (eg. house wife) ?

Because my understanding is that Depreciation Schedule is good for the first few years where the IP is still negatively geared and owned under person with high-income tax bracket.

 

Depreciation Schedule is worth doing on ALL IP's. High or low yielding.

 

The benefit is far better at higher income brackets. Your marginal tax rate depends how much each dollar of deduction saves you.

Will depend on where the house wife's income is at, if your under 20k and will remain there for an extended time, then there is no point because you're paying no tax and would be actively reducing the cost base with the capital works deduction. If you're above that you're going to get ~19% of the dollar back on the depreciation and report cost itself but it's still probably worth doing at that point.

You're correct that the higher the income the more the benefit.

 

Always worth doing then seeking advice from an accountant on how best to use the information as there are 2 methods in the schedule and one may suit your situation better than the other.

 

Depreciation schedules are worth it

 

@wogitalia so far yes, my wife is earning under the $20k bracket while I'm on the 34% tax bracket
the IP was just set 99% wife 1% myself.

 

Well since there is no benefits of depreciation schedule while my wife is still not earning above $20k annually, can I apply for the depreciation schedule later on few years later when my wife back to full-time employment (~3-5 yrs later) ?

 

Any losses can be carried forward.

 

@Tekoz seeing as your wife is under 20k per year, is there any reason why she is 99% owner? From a tax perspective it doesn't make sense. Unless there is something more to the situation?
You mentioned that the property is high yielding. Are you sure it's NG?

 

Well, my understanding is that she can claim it more rather than the surplus added to my taxable income.

So, yes shall I change it back to 50/50% as default ?

 

But there won't be a surplus if it's NG. She is on a low income remember? You have a higher income. So you want to take advantage of the losses to offset your income. That's if it's NG.
Have you spoken to a professional Tekoz? Are you getting tax advice? If not it's probably a good idea to speak to a tax agent.

 

See also
Legal Tip 68: Avoid 99%/1% ownership of property Legal Tip 68: Avoid 99%/1% ownership of property

 

Be very careful with the 99%/1% split, do you know whether you are "tenants in common" or "joint tenants"? If you don't know which one you are, then you might be reporting things completely incorrectly.

Essentially if you are joint tenants then from a tax and legal perspective you both own 50% of the property and should be reporting it as such. If you're tenants in common then the ownership is split that way.

I'd also watch out really closely for the CGT consequences and even stamp duty of trying to alter ownership percentages as well. The ATO hates it and as such are very on the ball when it happens because generally the primary reason for uneven ownership is tax avoidance and as such they are waiting like a hawk to shut it down at any opportunity.

You can start it from whenever, the early the bigger the benefit but if your wife isn't going to be in a loss and is under 20k income at the moment you wont be getting any return on the dollars spent now.

The way I read this is that they have a positively geared rental property and that his wife is under the 20k income and thus is not in a loss position.

If the depreciation schedule would create a loss position then, yes, it would be worth doing it from now and banking those losses to use at a later date.

To me it sounds like you've set up a particularly complex scenario here that you should absolutely be seeking professional advice on. Whenever I hear scenarios like you've named I automatically think of people who've tried to get creative on their own without getting the advice needed and it can get very messy. Just see an accountant, it's deductible as well and do it in your name, and make sure you're in the clear here.

 

Most importantly, Tekoz you took the plunge and bought!! Great stuff!! Where did you end up??