We have been told that our negatively geared IP should be in my husband’s name only as he earns an income but I don’t and so don’t pay any income tax. This would supposedly mean a greater tax return for my husband. Is this true? If the house is currently in both names how do we go about changing it? Do we need to change both the title and mortgage? Is there anyway I can show that I still have an interest in the property?
Daisii,
It’s true, your husband would be able to claim a bigger deduction if the property was all in his name. However, if you to change the ownership it will trigger a stamp duty payment, just like selling your half to him.
The other longer term point to consider is if/when you plan to sell. Lets use the following scenario:
1. You’ve held it for more than twelve months in joint names.
2. Your husband earns $50k pa, you earn $0
3. You decided to sell for a profit of $60k (after fees).Scenario 1- Joint names.
1. you split the capital gain and receive the 50% capital gains discount.
Your capital gain = $30k
Your taxable income = $0 + $30,000/2
= %15,000
Your tax = $1560 (approx)
Profit after tax = $13440Your husbands capital gain = $30k
His taxable income = $50k + $30,000/2
= $65,000
His Tax= $18360
Income + profit after tax = $46,640
Total combined Cash flow = $13440 + $46,640
= $60,080Scenario 2: Property in husband’s name
All the capital gain is taxable in his name
Your income $0, tax $0
His income = $50k + $60,000/2
= $80k
His Tax = $27,792
Income + profit = $52,208
Total combined profit = $0 + $52,208So by holding it in his name only, you would be $8,000 worse off the year you sell. You need to determine if the yearly tax deduction plus the price of stamp duty to transfer is greater than this.
Hope that makes sense, sorry it’s so long. If you can’t follow it feel free to email me some specifics and i’ll plug them into a spreadsheet i’ve set up for this stuff.
Brett.
[email protected]btw, i used a free tax withheld calculator from the ato web site to calcualte the tax.
This isn’t advice
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