Hi,
I have been trying to get an answer to this query but still not entirely close to the right answer.
What happens if X and Y (husband and Wife) buy an investment property that is only in X’s name (that is X is the title holder) but the loan is in both names as Y is a guarator on the loan.
When it comes to claiming the tax deductions on the interest – can it be claimed by both X and Y based on their loan contributions (which is very arbitrary) OR can the person (X in this case) who holds the title only claim the deduction.
I am sure there might be some of you who had this query before or first hand experience so would love to hear from anyone with some information or thoughts on this subject.
Thanks
Shiv
Hello
As far as I’m aware if the title is in X’s name and Y is only a guarantor for the loan all income and deductions have to be claimed by X. The only way Y is entitled to deductions is if the loan is in both X and Y’s names (not sure if that it possible without the title also being in both names).
There are a number of ways to equally split the deductions/profits from a property but most require the right structure to be in place before the property is bought. Unless you are prepared to pay the ‘penalty’ stamp duty which would be required to transfer the title (or part there of) I think you’ll have to accept that X get all the deductions (and later potentially any profits and capital gains).
Hope that answers your question.
I beleive only the owner can claim the interest. The other person is not on title, therefore not an owner and receives no benefit. I think this is covered in the ATO booklet on rental proeprties.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Terry is right.
The ATO goes straight to the Titles Office and sees who is on there.
They care not a cracker about what knots you have tied yourself in to keep the Bank happy.
X gets 100% of the rent and 100% of the deductions. Y is entitled to a cup of tea once a week…if she’s lucky.
None of the above should be relied upon. I’d suggest coughing up $ 500 to ask a solicitor formally, who is qualified to give you advice. If they get it wrong….you can then spend another $ 50,000 trying to argue with them.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Shiv
Why wouldn’t you just buy the property as tennants in common with a 99/1% share of ownership.
The bank would be happy as they are not interested in the ownership split merely the serviceability and the ATO would be happy for you to split the deductions in the percentage that the property was held.
Cheers Richard
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