I pay a yearly management fee to my wife for each property. My last tax return it was $450 a year per property.
Its in my tax return as a rental expense and income in my wifes tax return. I claim it on the basis that she gets calls from agents and needs to find builders etc.etc. My accountant does not seem to have a problem with it.
The properties are in my name for negative gearing purposes and my wife is a stay at home mum.
It works well for me. Does anyone do anything similar? If your in a similar postion to me it may be worth considering.
Hi,
I use my parents in a similar way since they live near a house i bought and i’m a couple fo hours away – they can take care of it and they have no problems anything major and they ring me – tenant is fine with it as well
it works so don’t break it
cheers,
bluecatDo today what you want to do tomorrow
I know for a fact that the ATO take special interest in transactions which are not at arms length like paying a family member for services. This can attract attention but if it can be justified, well explained and backed up by evidence and be reiterated by tenants then it would probably be allowed.
The question is do you want to attract the attention of the ATO and have an audit done?
Yack,
This strategy will not work for the properties that you already own in your name only, but can I suggest that you buy your next property in joint names with your wife. If the property is negatively geared you can salary sacrfice to negatively gear it even further in your name and possitively gear it in on your wife’s side. If it is possitively geared you can use salary sacrifice to effectively negatively gear it in your name and possitively gear it in your wife’s. This arrangement would allow you to effectively transfer more income to your wife than a management fee and any CGT could still be split equally.
There is a calculator on http://www.bantacs.com.au that will show you how this works. But note your wife may lose her Part B entitlement if you have children on the otherhand it may increase your part A entitlement as there is no rental loss in your tax return that is added back.Julia
Julia
You said –
“This strategy will not work for the properties that you already own in your name only, but can I suggest that you buy your next property in joint names with your wife. If the property is negatively geared you can salary sacrfice to negatively gear it even further in your name and possitively gear it in on your wife’s side.”
This does not make sense to me. Can you please clarify? Also how can I salary sacrifice a rental property? Again makes no sense to me.
Please Clarify?
I acknowledge the comments of HousesOnly. I see where your coming from.
Have you considered purchasing your investments in the name of a TRUST there by you can disperse profits accordingly. If you are buying property (investments) in your own name and you get sued you could loose the lot, ASSET PROTECTION, if you are not good luck!
I am not how I can setup a family trust with 4 properties that are mainly negatively geared all in my name and just the one main income.
What are the bank implications?
Maybe I need to go see my accountant.
Yack,
Sorry on re reading my reply I can see that the start is confusing. What I am saying in the first paragraph is the point I am making does not apply to properties only held in your name so I am only talking about a strategy you should use when you are in a position to purchase a rental property in joint names.You are quiet right to question how you can set up a family trust with properties purchased in your name. First of all you would have a huge stamp duty cost and the trust cannot distribute the losses to you so you would loose the benefit of negative gearing.
The strategy I suggested for a jointly owned property involves you salary sacrificing the cash flow rental expenses as an exempt fringe benefit. This will reduce your taxable income then both you and your spouse receive half the rent and claim half the depreciation each. The high income earner gets all of the expenses but only half the rent. The otherwise deductible rule that exempts the benefit from FBT applies regardless of whether the expense would have been deductible to you or your spouse.
Go to http://WWW.bantacs.com.au there is a calculator and detailed explanation. I know it is not an easy concept but it works and there is an ATO private ruling verifying this.Julia
Hi Yack,
We do similar, except we don’t already have an agent managing the property, the property that is in my husbands name I manage so that’s why he pays me to do so. This property is also close enough for me to do the management of it. However, I do have an ABN (not GST registered though) and I do write him an invoice for the service.
Does your wife have an ABN, because if not then technically I think you should be withholding 48% of the payment and you’d need to send this to the ATO and then technically she should claim that half back when she does her tax. If she hasn’t got an ABN, it’s easy to apply for one from the ATO web site. Saves the hassle of withholding tax, also makes the cost more official, it’s on the books “so to speak” and not hidden within them.
Our other properties are further away and are either in my husbands name or joint names,so we have them managed but the distance is our argument for me only doing this one.
Julia, that’s an interesting stategy you pointed out and although it took a bit of thinking over I can see how it would work (if your workplace allows salary sacrifice for anything other than super that is). Glad you brought it up though, does us all good to think outside of the box and open our minds to other ideas.
PK
Fortune Favours the Bold.
Purplekiss
You dont need to register for GST unless your turnover is greater than $50k. Thats why we have not registered.
Julia
I will look into it further.
Julia
You Said –
“salary sacrificing the cash flow rental expenses as an exempt fringe benefit.”As interest is my largest expense, can you salary sacrifice this? Is this termed a cash flow rental expense?
Yack
Yes you can salary sacrifice the interest. Both your’s and your wife’s share if the property is in joint names.
Julia
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