Negative gearing

Hi James

Firstly Happy New Year to you and welcome to the forum.

It is a question i get asked by clients all the time and there are several correct answers.

In most cases clients prefer to still buy in joint names as the spouse likes to feel involved so we normally structure the Title as Tenants in Common with 99% of the shares being allocated to you and 1% to your wife.

This way you would claim 99% of the deductions and her 1%.

The correct structure will however be dependant on whether you have children and whether the property is negative / neutral / positvely geared together with factors in relation to your occupation and the liability of being sued.

More imformation would be required to give you a proper answer so feel free to shout if you would like further advice.

Hi,

Thanks for your post, and thanks Richard for the answer given.

Another option would be to buy the property in your own name, and have your wife co-guarantee the loan. That way her income would be included in determining how much you can afford to borrow, but title is in your name.

Since you are -ve gearing, there is limited use to family trusts, as losses in these entities cannot be distributed.

Some may suggest you consider a hybrid trust, however be aware that the ATO is looking at these very closely at the moment.

Normally, investment properties are insured for public liability and also house insurance. You may like to insure as a landlord if applicable (eg. to protect the income stream and also insure against malicious damage). The tenant normally insures the contents (since they own them).

Cheers,

on one we purchased the solicitor just hand wrote the % division against our names in the contract. That is the only place it is recorded. Have apportiotioned income and expenses according to this % at tax time. And when it is sold (for sale now) the distribution of profit will be as per the % division on the contract. Both the solicitor and the accountant tell me this is fine. Just my experience.

Cheers
Tammy

Hi…

I third previous comments: Putting it on the Contract does nothing.

If you have the records showing you've paid 100% of all expenses, then you can claim all tax deductions. Mind you, the records must be clear.

For example, the money to pay expenses comes from your bank account, not joint account with your wife. However, the income should also go into your account, not joint or her account.

Cheers,
Cattleya

Will the following work? Buy it in your name, wife as guarantor. You get all income/deductions/pay all costs. In 3 years, move into the property transferring 50% ownership to your wife (at nil price). Upon eventual sale, no cgt on her proportion but you will pay 3/x * MRT * 50% (discount)  for the period which you didn't reside in the property.

Would your wife qualify for fhbg if she bought a PPR?

Thanks Richard, I transferred  as per #2 at minimal cost. Geez, they keep cutting out the lurks.

Old post I know, but I believe if you rented it for the first 3 years before you move in you will need to apportion the CGT i.e. if you sell after 5 years total, you will pay CGT on the first three years worth of gain and not on the second two. Further I think the tax office will work it out linearly i.e. you will pay CGT on 60% of the property (as opposed to the actual CGT accrued in each year which may/may not work out better for you since in theory CGT is compounded which means lower monetary gain in the earlier years).  Getting an evalutation at the time you move in could be to your advantage here.

Moving into the property initially and establishing it as your PPoR entitles you to a 6 year period of grace where you can rent it out and then you have up to 6 years to move back in or sell it, any CGT incurred in this period is not taxable. As always check what I've said with your accountant. Of course buying it as a PPoR may reduce some of the deductability of the aquisition costs (especially if you are in canberra where stamp duty is deductable in the first year since it is on crown lease).