Hi all
A hypotehecial situation –
I and my wife borrow money to invest in an
IP which would be negatively geared. We are joint applicant for the loan. However, we are tenants-in-common for the IP, with my share as 99% and my wife as 1%.Can I claim 99% of the rental loss against my income?
Thanks in advance for your inputs.
Bid
Hi Bid,
Income is declared and costs claimed in proportion to your ownership ratios.
In the example given above 99% of the income is declared on your return and 99% of the costs are calimed by you.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
Thanks Derek,
Just to repharase to make sure I understand it correctly –
Although me and my wife are jointly and equally liabile for the loan, the ownership of property drives the expenses deductions. I can claim 99% of the interest expense (instead of 50%) against my 99% income.
Thanks
Bid
This question should really be directed at a qualified accountant.
However, my understanding suggests 99% of the loss will be claimable against your income. Although this sounds good, keep in mind you are giving someone else a dollar so they return to you 50 cents (if you are in the highest tax bracket). I trust your investment is in an area of strong capital growth?
Cheers
I believe that is correct….although it is hard to think of when investing like this as a couple (husband & wife). What I mean is that buying as a married couple is different to buying with your brother/sister. In your example you would own 99% of the property and therefore be eligible to claim 99% of costs, depreciation, etc.
But, from what I understand, there must be a legitimate reason for setting up a structure like this, especially since it results in an uneven distribution of income/expenses. Because it is your wife, the ATO may say why not 50/50, or why not all in your name? Whilst you may be able to legally setup up such a structure, the ATO may not let you claim in those percentages. Unfortunately, maximising deductions is not a legitimate reason.
Another point to note with this structure, unlike Joint Tenants, in the event of your death or incapacitation, your share does not automatically default to your wife. You must specify in your will where you want your share to go.
As Jofus said, best to check with an Accountant.
Hi Bid,
I may have misinterpreted your open post or I may be showing my ignorance in property investing. In your open post you stated ‘claiming the rental loss’. I was under the impression that you cannot claim the lost rent through a property’s vacancy period. If I’m right forget it, if not then I’m owed a shit load of back pay from the ATO for all my vacancy periods! Have I misunderstood your post?
Cheers,
Gatsby.Gatsby,
I think you need to see a decent tax advisor ASAP.
I believe that you can claim holding costs incurred during a vacancy period if the property is available to rent.
Cheers,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Hi Mortgage Hunter,
I assume holding costs your referring to to be advertising for a new tenant, interest on IO loan, etc. I’m referring to the lost ‘rental income’. If you can claim this then I am obviously in need of a good tax accountant (hell, even a shit one wouldn’t hurt!)lol!
Cheers,
Gatsby.Hi Gatsby,
It is certainly time to get a new accountant.
Provided the property was available for rent you are entitled to claim any costs incurred during that period. For example you own a property for the full financial year but could only find a tenant for 6 months despite it being available for rent.
Under these circumstances you could claim full years rates, taxes, interest, repairs, advertising, management fees etc.
The key point is deductibility is determined by the period the property was available to rent and not neessarily how long the tenant was there.
If, however, you were renovating and it was considered ‘untenantable’ (or you lived there) for three months you would reduce (very roughly and to highlight the point) most claims above by approximately 25%.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
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