A rental property owned together: each owner's depreciation schedule

Co-owners share a rental property's income and deductions in proportion to their legal interest in it: half each as joint tenants, or the shares on the title as tenants in common. That is so whoever paid the deposit or receives the rent, unless the owners are carrying on a business of letting (Taxation Ruling TR 93/32). Each owner claims their share in their own tax return.

Depreciation is split the same way, with one difference that works in the owners' favour: under section 40-35 of the Income Tax Assessment Act 1997, a co-owner's interest in a depreciating asset is treated as the asset itself. The $300 immediate write-off and the $1,000 low-value pool are tested against each owner's share of an item's cost, not the whole.

Two equal owners each hold half of every item. A rangehood costing $600 is a $300 asset to each of them, written off in full in the first year; a dishwasher costing $1,800 is a $900 asset to each, which goes into the low-value pool at 18.75% in the first year and 37.5% of what is left after. On a single schedule for the whole property the same rangehood would be pooled and the dishwasher depreciated over its effective life.

Over the life of the schedule the owners' deductions add to the same total as one schedule for the whole property (the guide to how much depreciation a rental can claim works one for a sample house): the thresholds bring the deductions forward, they do not add to them. In the first few years the difference is real, and it is largest for the kitchen, laundry and outdoor items that cost between $300 and $2,000.

For shares other than half, the limits scale: a 60% owner writes off their share of an item costing up to $500 and pools one costing less than $1,667; the 40% owner, $750 and $2,500.

One report covers the property and every owner. The item schedules show the whole property's costs; section 1.1 sets out each owner's own schedule, worked on their interest in every asset, year by year under both methods, with a note of the limits that applied to each owner. The workbook has the same figures on an Owners sheet, so an accountant can take each owner's column into that owner's return.

Capital works are split in the owners' shares and nothing more: the 2.5% a year on the building is the same whether one person owns it or four. What it applies to is the building's construction cost, which turns on its floor area, where it is and its build quality and storeys, not on who owns it. Two equal owners of a house in the Australian Capital Territory each claim half of its building's deduction; two owners of an apartment in Victoria, half of the apartment's share of the whole building's.

The owners' names as they appear on the title, separated by "&", and the shares if they are not equal (60/40, or 2:1). Shares left blank are taken to be equal, and the report says so. Who paid for what, or who receives the rent, does not change the shares; a different arrangement between the owners is a matter for their own agreement and their accountant, not the schedule.

A company owner is different again: a company claims the whole of its deductions, and the previously used plant rule of 2017 does not apply to it. Choose the owner type on the form and the report follows.