Listed Property imposes limitations on depreciation deductions for certain types of property, such as luxury automobile and for certain property (like computers) used for both business and personal use. Listed property includes property used for transportation or entertainment and certain computers and cellular phones.
Listed property is any of the following:
- any passenger automobile
- any other property used for transportation
- any property of a type generally used for entertainment, recreation, or amusement
- any computer and related peripheral equipment unless it is used only at a regular business establishment and owned or leased by the person operating the establishment
- any cellular telephone (or similar telecommunication equipment)
Benefits of investing in listed property trusts
The other change that has happened in recent times is the emergence of the global listed property trust market. Australia is one of the more developed global markets and makes up around 13% of the world's listed real estate assets. Local listed property trusts have taken advantage of the large global market and have been increasingly adding international assets to their portfolios. Benefits of investing in listed property trusts:
- listed property trusts provide diversified exposure to a professionally managed portfolio of real estate
- income payments are higher relative to stocks
- there is the potential for capital appreciation
- listed property trusts are generally less volatile than stocks
Application to listed property
Elements of an expenditure with respect to listed property that a taxpayer must prove are:
- the amount
- the date
- the business purpose of an expenditure or use
The amount of an expenditure may be the cost of acquisition (i.e., the basis of the property), a lease payment, the cost of maintenance and repairs, or the cost of capital improvements. The amount of use is the ratio of business use to total use of the property for a period of time, determined on the basis of mileage for automobiles and other vehicles and time for other listed property.
Special depreciation rules for listed property
Listed property is subject to limits on allowable depreciation. If listed property is not used more than 50 percent in qualified business use, use of accelerated depreciation is restricted. If this happens after the first year of recovery period, excess depreciation is recaptured. Qualified business use of property means use in taxpayer's trade or business. Business use percentage is qualified business use of property divided by all use during tax year. Leasing or compensatory use of property by 5-percent owner or related person is not qualified business use. Taxpayer must have adequate records to support deduction and business use claim. Records can cover only part of tax year, if this portion is representative of entire year. Repetitious uses may be substantiated as a single item. Improvement made to listed property that must be capitalized is treated as new item of depreciable property. Period and method that apply to listed property also apply to improvement. Similar rule applies to passenger automobiles, taking into consideration overall limitations on depreciation deduction.
- Australian Master Financial Planning Guide, (2011), CCH Incorporated, Sydney.
- Benesh B.K., Bryant M.K., (2019), Depreciation Handbook, LexisNexis, New York.
- How to Depreciate Property, (2000), IRS publications, Washington.
- Pension and Employee Benefits, (2004), CCH Incorporated, Chicago.
Author: Karolina Morga