2 Investment Properties, not working so no income – where is my tax benefit?

Hi tar_dolma

As you'd know, your husband can offset his losses on the property he has an interest in, right now.  Your losses will accrue indefinitely, until such time as you start to earn an income again, when you will be able to offset your accrued losses against your income.

As you have decided not to work, this has an effect on the total household income.  Possibly you could look at selling one of your properties with a vendor finance (VF) Instalment Contract.  This would allow you to fix both your capital gain on that property allow it to generate fixed monthly positive cash flow.  The plan being, for the fixed monthly positive cash flow to make up the negative gearing on the other property.
 
A sale of this type would generate cash flow at three points:
1.  The deposit the incoming VF buyers pay
2.  The positive monthly cash flow and
3.  The "back-end profit", i.e. the difference between what you sell the property for and what you owe the bank on the property.

As you are selling to people who cannot get a traditional home loan, you can normally sell at a premium price.  In your situation, I'd probably not sell the property your husband has an interest in, as he is getting some tax benefit from his 50%.

However, please don't take any of the above as advice and consult your appropriate professionals.

Cheers,  Paul

Don't follow this advice.  This is a definite No No as far as the ATO is concerned.  Worst case scenario is you will be taxed on any distributions made to you and your husband will be taxed on the whole income. 

Remember before you can carry forward losses this is after applying any exempt income such as Family Tax Benefit.

What was your reason for investing?  Was it simply to get tax advantages now or did you actually have a purpose such as being able to afford to retire.

If you are employed then using a trust to receive the wages won't really mean much as the individual doing the work will still be taxed – this is known as the alienation of personal services income. Nevertheless, it may still be possible to do it, or have it structured so that part of the work is attributed to a business run by a trust. There are some rules, PSI rules, that need to be over come for this to be possible.

Another way would be for the wife to run some sort of business so that she can be paid by the husband – this will reduce his income (assuming a business expense) and increase her income. This financial year individuals can earn up to $16,000 pa and pay no tax (taking into account low income rebates etc) so it has the potential to save a but of tax – especially if there are losses from prior years too.

Say you have a loss of $10,000 this year (1st), then next year you have a $5,000 loss, the third year you will start off with a loss of $15,000.

You then sell a house and have a capital gain. say $100,000 capital gain. I think the loss is applied first – though actually it probably wouldn't apply first as your loses would be income tax losses, not capital losses. So I think you would just get the 50% CGT discount which would bring the CG down to about $50,000 (actually less as you would take into account various costs). This capital gain is added to your other income which is -$15,000. So your net income would be $35,000 and you would pay tax on that.

Say you didn't sell and in year 3 had postive $5,000 income your total income would then be still -$10,000, and in year 4 you had another $5,000 income so your total income would be -$5,000 etc etc

So it would be some time before you had to pay tax.

Also bear in mind that the centrelink has its own rules for calculating benefits

And I am not an accountant, so am not sure if the above is that correct, but it would give you an idea.

ps, if your husband has a business, why not have yourself run that business – assuming it is making a profit.