I have purchased an investment property and am refinancing through another Bank. I have been told that I must have all loans in joint names because security is being taken over the home we live in (with a separate joint mortgage) and the investment property, which is only being purchased in my name.
What takes precedence – as I will be negatively geared, can I legally claim all interest deductions (and declare all rental income) as the investment property is only in my name, or because the proposed loans are in joint names, does half the interest decuctions go to her. Currently she does not earn enough income to pay tax at all, so there would be no advantage to do that. I am aware that we can't claim any deductions for the home we live in, however are using that as additional security to purchase the full cost of the investment property.
Any advice welcome. Thanks. I have been given conflicting info so far.
Looks like you have been misinformed. You can have the existing home in joint names and the new loan in just one name – the other party not on title will have to provide a guarantee though as their security is being used. you can do this with separate loans too.
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
As Terry has mentioned it could just be that the new lender requires this from you irrespective.
As long as there is a beneficial interest you can certainly have the property in one name and the loan in two names.The other thing it sounds from what you have posted that your new lender will be cross collateralising the securities which i certainly would try and avoid at all costs.
Might be time for a second opinion on the refinancing.
Richard Taylor | Australia's leading private lender
To claim the full interest on the rental property, you should be the sole owner of the property but the loan may be in your name or joint names.
If the loan is in joint names, your wife will need to "on-charge" her half of the interest to you (ie, in her tax return, she will claim her half of the interest paid to the bank as a tax deduction and include in her assessable income a corresponding amount of interest income received from you). As you will be incurring the interest on both "loans" (ie, half from the bank and half from your wife) that are used to fund the rental property, the entire interest charged by the bank is effectively tax-deductible in your hands.
Eddie
[email protected]Hi .I'm new to this site .I have just done something similar in W.A with one of the majors.What we done was,I was made sole owner of the new investment property , my wife and i are joint owners of our ppor .Now she just acts as a guarantor as such (because her name is on the other title) but receive not tax benefits at all .She has nothing to do with my investment property , other than her name is on the title of the property i get my Line of credit/equity deposit and closing costs from.
Now the bank will ask her to seek legal advise and want documented proof of this.What we done was we wrote a letter stating that we had agreed to take this path solely for tax purposes etc … etc…. and we both signed the document .Thank god, they were happy with that and we didnt have to pay the lawyers.Hope that helpsgrasshopperinvestor
Just a brief caveat – be careful with what you are doing with that letter saying you went into the arrangement solely for tax purposes – the tax law contains a general anti-avoidance provision (Part IVA) which empowers the Commissioner of Taxation to unravel an arrangement where the dominant purpose of entering into the arrangement is for one to obtain a tax benefit.
Let me put it this way, if I were the tax man, I would love to get hold of that letter!
Eddie
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