Thankyou Geronimo, Aceyducey and Bionic Beer Gut for your helpful advice.

Wrappack wrote:
If you are purely focused on the tax deal, why not just let yourself get screwed by the annual end of fin year agricultural scam? Pay less tax by earning less or losing more! Doesnt sound like a smart deal to me! (unless cap gain in future to offsett the loss)

I am not “purely focused on the tax deal”. I was simply asking this question to give myself as much information as I could, before deciding whether to go ahead or not. I believe it’s part of the “due diligence” we should all be doing in our each of our investing decisions.

Wrappack wrote:
Consider WHY they want you to ‘go you halves’. In all honesty, it is probably because they cannot afford it on their own!

Yes, it is because they cannot afford it on their own. Is it a bad thing for them to seek alternate sources of financing their purchase? We all do it in our investing – we ask the banks to finance our house when we cannot afford to buy it ourselves.

All along we have been considering this from an investment point of view.
While ngatively geared, the property is in an area which is experiencing growth at this point in time. The vendor is selling it at below value (compared to other properties recently sold in the area) as he is keen to sell before the new CGT rules start. So there is quite a good potential for capital gains.
We have looked at the property this weekend and will most likely pass on it, as we had intended from the start to buy into positive cashflow properties and this one would tie up too much of our cash and loan serviceability right now.
Our friends have found another possible avenue to fund this, so we are all happy.
They have an interest in a negatively geared property, which they had originally planned to sell in about 9 months from now. They have spoken to the vendor of the property they are looking to buy and he is satisfied with their offer to sign and lodge deposit before the new CGT rules and settle in 9 months. They will move in after signing and pay rent until the settlement date.

They’re happy, vendor’s happy, we’re happy, a win for all.

Once again, thanks for all of your helpful contributions,
Regards, Michelle.

Hi, thanks for the advice so far.

I understand that if things are not put in writing up front then there will be greater scope for disputes. We definately intend to do this. We are meeting tonight to discuss the pros and cons of getting into this situation.

BTW, we have lived in a shared rental with half of this couple for several years and therefore know many of his bad points. He has improved since then and his partner is quite level-headed. She already has a -ve geared IP with family members. We are quite aware of many the potential downsides to investing together.

Mainly I was interested in the tax implications in this situation and also what sort of structure this should be set up under, if we decide to proceed.

Regards, Michelle.